This Week in Startups - E1068 AMA: NEA’s Ben Narasin takes questions from founders: most important content in a pitch deck, COVID’s impact on dealmaking, traits he looks for in founders & more!

Episode Date: May 30, 2020

NEA's Ben Narasin takes questions from founders: most important content in a pitch deck, COVID's impact on dealmaking, traits he looks for in founders & more! Join the TWiST Slack: https://launchevents.typeform.com/to/kLq5Bi Follow Ben: https://twitter.com/bnarasin 1:13 Paul: Has the current crisis changed your investment thesis? If so, how? 2:40 Ash/Christopher: How to overcome the money raised vs revenue generated in enterprise SaaS that requires heavy product work to reach product-market fit? 4:13 Emberlynn/Srinivas: What is the most important content in a pitch deck? 7:26 Guilherme: What will the VC funding landscape look like after the crisis passes? 8:37 Mary: What is the best way to present a newly launched startup that has been severely impacted by COVID-19 to investors? 10:48 Daniel: What advice would you offer college students passionate about venture capital so that they can also become investors? 12:22 Mark: What immediate skepticism do you have when you look at early-stage startups? 15:54 Len: What factor(s) would most set an early-stage (i.e. seed funding, launch-ready, pre-revenue) company apart from others seeking similar funding? 18:15 Aneesh: My startup sells multiple SaaS products for restaurant digitization. We don’t have the bandwidth to handle sales and marketing of all products at once. What should be our strategy to prioritize? 19:49 Linards: At what level of product traction will investors start to be interested? How does it differ across verticals? 22:40 Avidan: What role (if any) will equity crowdfunding play in the venture capital ecosystem at large? 23:43 Adam: What are you seeing related to startup valuations and VC terms post-COVID? 25:18 Emin: What kind of marketplaces would you like to see in the next 5 years? 26:34 Tammy: Do you think people will need a college degree for the jobs of the future? 28:48 Ellie: Post-WeWork, how should a tech startup with profit margins on the smaller side think about building a scalable and ultimately profitable business model? 30:15 Wei: What sectors are you investing in? What are you most excited about nowadays? 31:40 Ope: What skill sets do you need to move into VC from a non-Investment Banking background? 33:09 Suruchi/Mireille: In a medium article you wrote you wrote: "winter is here, severely ....don't obsess about the downside, think about the opportunities.” What opportunities have arisen so far? What changes are permanent and what changes are temporary? 35:20 Nghia: What are some books that you recommend today? 39:30 Ben: Are there areas that are non-investable at the moment whether it be overcrowded, overpriced, or the prospects aren’t great due to COVID? 40:24 Charles: Do you have any instances where a founder's positive or negative traits/signals have influenced a deal decision? On reflection, has instinct proved a better indicator than hard numbers? 43:42 Dave: What was your biggest exit/best investment? How did you source the deal? Alternatively, could you tell your worst anti-portfolio story (most successful company you passed on)? 44:46 Barry: What are some interesting healthcare startups or spaces that you have a favorable outlook for? 45:51 Raman: What’s your take on the future of learning?

Today, on This Week in Startups, we have an Ask Me Anything featuring NEA venture partner Ben Narison. This AMA was recorded live in our Twist Slack channel. To participate in weekly AMAs and discuss all aspects of startup life with Jason and our community of 30,000 founders, join us at this weekin startups.com slash slack. Ben Narison, I'm at NIA. I'm a venture partner here and have been for about three years. And prior to that, I was an entrepreneur for 25 years and a seed investor for 10. So a lot of different types of experience, some of which are highly relevant to what we're seeing happening right now in the world, mainly because I've started companies in a multitude of difficult times. I've started my first company out of college on Black Monday, a day when the Dow was down 22.5%. I live through.

the bursting of the bubble, 9-11, 2008. Only in 2008, I was an investor instead of an entrepreneur. So in the forum of Ask Me Anything, I've got this list, and I'm going to go through them all until you guys cut me off and tell me my time is up. Paul, has the current crisis changed your investment thesis, if so, how? You know, I think everybody that is an investor is starting to spend material time thinking about what the world might look like post-COVID. I have a variety of different views of things that could change, but I don't know if fundamental anything material has changed about how I look at the world as an investor. I think of simply looking for entrepreneurs that make me say, wow, is my job. I want to find entrepreneurs that show me a vision

of the future that I either haven't thought about before or that they've figured out how to perfectly encapsulate. The strength of the person is sort of critical to all of this and is the most important thing in any investment. You know, I have this saying, Jason hears me, say this all the time whenever I meet any of his groups, but I need five things to make an investment.

People, people, people, a great idea and a huge market if it works. You've got to anchor on people and nothing about that has changed. I do think that I would like to see a bit more time of reality that might be a quarter or two

to understand some sub-segments of the market. I had a surprising call today with one of my own personal portfolio companies that's in the, let's just say, entertainment and ticketing space, which I expected to be enormously challenged, and they're actually growing quite well. The certain realities that they provide are different than the ones that others do, and it's

providing a lot of value to venue operators. All right, so that's that one. Ash, Christopher, how to overcome the money raised versus revenue generated at enterprise SaaS that requires heavy product work to reach product market fit? It's a long question. Let me try to digest it. I wanted this to truly be alive, ask me anything, so I didn't pre-read these. if that question means how do I address the fact that I raised a stunning amount of money

and I don't have any revenue yet, that's a hard one. You know, people have become even pre-COVID very focused on some new things. So if you look pre-COVID at the IPO market and ultimately any investor, at least a tier one investor that I'd respect, wants to believe that their companies have a shot at being freestanding public companies. So the successful public companies over the last few years pre-COVID, shared two things. Tremendous growth, tremendous margins.

40 to 90% and well over 100% in some cases on the growth side. What happened after we work is that people started looking at governance and very specifically a path to profitability. So when you've raised a lot of capital on the hopes and dreams, but you've not been able to show that it's translating into revenue or you don't have a path to profitability, I think that has become really, really hard. Not a lot of people are still willing to bank that. Now, there can be some outlier examples that are not true of that, you know, where the markets are just so enormous in the time it takes to get there are material. But by and large, you know, I think that most of the sort of bloom has been stripped away and people look at the rose for the roses sake right now and they want to understand what the reality of a business is going to look like. All right. The next one is, what is the most important content in a pitch deck? So I've seen an uncountable number of pitch decks. I see well over a thousand companies a year. I've been doing this now for

13 years. I mean, you can do the math. I'm really picky about pitch decks. I help my entrepreneurs a lot when it's time for them to raise from external parties with working on it. Think of it a lot like a journalist would think about reporting who, what, when, where, why, and how and how much. You know, who are you, what are you doing? Why are you doing it? What are you charging? Who's buying it? Why are they buying it? You know, those simple sort of whatever they used to call the five Ws, I get that How is not a W are critical to a pitch deck and you'd be amazed at how many people don't put it in there. One of the tricks I help my entrepreneurs with when they think about their own presentations going in for a series B or C or whatever else is I, you know, I have them come over to

my house and we go through their deck in great depth. This hasn't happened since COVID. But often their decks will be too long. Almost all decks are too long. Too convoluted, too much story arc. And I'll sometimes say, look, why don't you print out your deck? Now, except for the cover page, which should be the name of your company and your elevator pitch, one line that tells me exactly what you do, I want you to figure out, and the next page has to be the team. If it's late enough stage, it doesn't have to be the team. But usually the team either leads or ends the deck. I like the team to lead the deck unless it's really late stage and your revenue is material. So take that slide deck and other than those two slides, figure out what the

most important thing you need to tell your investor is. And then repeat that and repeat that until you've told the story well enough that everything else can go into the appendix. Never bury the lead. I've seen entrepreneurs wait for page 27 to tell me what really, really, really matters. You should know what really, really matters. It's unlikely that you don't. Make sure that gets up front. Now, one other trick, some people want that natural story arc, and I get that. I'm a writer.

I like my story arcs. It's okay to do a summary slide. You know, you go up front and you say, it's Ben Harrison. I run company XYZ. Let me tell you what I'm going to tell you. We've grown 500% in the last year. Our revenue went from, you know, $1 million to $5 million. We're 38 people working on X solution.

I already told what we do because I put it on the cover page. Blah, blah, blah, blah, blah. You can put the core points and hit them real quick, just so I know where we're going. Revenue is almost always important. I've had people go on and on, and it can go against you or for you. Usually, the longer you wait to tell me your revenue, the worst I assume your revenue is. So I was helping entrepreneurs a favor to one of my partners because they were concerned about how they would present to the firm. And I wanted to help them do a better job of it.

But I didn't know the details. And about 20 slides in, I'm thinking, man, this poor kid, you know, he's telling me all these stories because he has no revenue. And then he comes out with, and two years in, we've got 27 million revenue. I was like, what? You waited this long to tell me that? Like, come on, man, you got to put that at the front. You can anchor on that. It can be done as a summary. I tell you that story because when he presented, one, he did a great job of presenting. And two, we did have one person that was critical to that meeting that in advance had warned he was going to have finite time. And I think if he hadn't gotten that hook in the mouth with that key point of data in the beginning,

he probably would have lost that person. And so he got a lot more time out of that person than he otherwise would have. What will the VC funding landscape look like after the crisis? Venture funds at the top tier have a lot of capital, a lot of dry powder. Everybody's looking for the deals they missed. Everybody's trying to think about what the next deals should look like. It'll be fine. I think it'll be more logical. I think deals could take longer in that people have more time to spend on things right now. And if you're truly going to meet people, remotely? Are you really going to do a deal as quickly? I mean, if I've never, I've not yet done a deal where I didn't meet the human. Actually, that's not true. In 13 years, I did one deal where I did not

meet the human being. Highly referenced in personal investment, seed deal. One of my entrepreneurs I'd known for a decade was the one that brought it to me. We did multiple calls, but it was another country and I didn't get to go visit them. And I wrote a small check, but I'm excited about what they're doing. But by and large, you know, if I'm going to write a $5, $15, $150 million check, hard for me to comprehend how they do that without meeting you because people are so important to me. Now, having said that, if other people on my team know you or if I can get really, really strong references, that helps. So think about when you work with venture, how you can sort of in the time period when you can't connect directly, how you can get references into them through people that know you and know them. What's the best way to present a newly launched startup that has been severely impacted by COVID?

Well, we're all realistic. We get that that's going to happen. And so you're still going to have to tell us the story. of what you believe will happen in the future. And people will probability wait, whether they believe that's going to happen or not. I mean, this is all a game of probability weighted outcomes. Right now, those are harder to do. But, you know, I have a thesis that potentially will see a significant slowing of consumer purchases. Because people realize by being home for two months, they don't really need that much stuff.

And maybe all this garbage they buy isn't stuff they need. I stopped buying things a long time ago. Maybe that becomes a thing. So if you're launching a new e-commerce consumer brand product where, you know, I am purely a discretionary income play, you know, my thesis doesn't help me get there, but somebody else's thesis might help them get there easily because they have a different view. Maybe we want more comfort products. Maybe we want, you know, daybeds, who knows. So you tell the story because the story is what helps us understand your vision. Being a good storyteller is an incredibly important part of fundraising, more important than I ever realized. I've always given a lot of credit to good storytellers. and I've always been critical of folks that couldn't tell a story well. And I've realized that I probably was maybe not critical enough because I used to think to myself, while I'm being unfair, storytelling is important. People sometimes say to me, someone just said this to me a couple days ago,

well, it's very complicated. It's very hard to tell the story in a precise way. I said, that's interesting. You know, we used to have a partner here who was a Nobel Prize winner who explained nuclear fusion to me on a Post-it note in under 30 seconds. I have the Post-it note on my wall. Einstein used to say, if you can't explain it, simply, you don't understand it well enough. If those two folks can do it, so can you.

So practice, practice, practice. Make sure you can tell that story and tell your story. That's all you can do here. People will understand that COVID has had impact, and then they'll decide whether that is relevant to the future. Sometimes it's to your benefit. Some people are seeing COVID bumps. And it's very hard for our investors to figure out how much of that will stick. But this is the other side, the not negatively impacted, but the positively impacted things.

about how to project what the future might look like for you post the up or the down of COVID. Okay. What advice would you offer college students passionate about venture capital so they can become investors? That is a tough one. I occasionally do favors and have lunches and coffees with folks. It's a very common ask. I mean, net net, it took me 12 years to get this job. And I was as an investor for 12 years. I had one IPO and a couple billion dollars worth of outcomes. And I was a successful entrepreneur before that took my company public. I'm not the norm. There's a very specific process for getting an associate role these days that's more driven by getting a job at the best banks in the world and then being recruited by the best recruiters. Not always. I mean,

there's the great young people that come in from all sort of places. Serendipity is important, but I would say pick a niche, build your own brand in it and do the best you possibly can. It's hard now, but it's always been hard to get a job in venture. I think that with seed and pre-seed and early angel, there are chances for people to build their own reputation and and show some proof of the ability to invest. I personally would love it if we recruited more entrepreneurs and more early stage sort of precede investors into the roles. But that doesn't always work out. It's highly unpredictable.

People are making a big decision when they bring you into a venture firm. And because if you're going in as a partner or GP, you know, it's a 10-year journey. And those journeys are long, right? So it would be good if you both delivered and were someone people who can get along with. But an associate role, you should look into sort of the firms. I don't even know who they are because I don't spend a lot of time on that, but there are a finite number of recruiting firms that sort of specialize in that, and they're a good path.

And you might as well follow the process. The process is your friend. What immediate skepticism do you have when you look at an early stage startup? I mean, I go in open-minded. Everybody wants to put the best face on their information. So you assume they're giving you the optimal positive. I still trust the data is accurate unless something doesn't make sense or smell right, in which case I try to dig into why.

But I don't go in assuming there's a challenge. or a problem that I need to uncover, I go in saying, okay, I want to hear the story. If I take a meeting, you know, historically I was always pro meetings only. My EA would say, we could do a call. I'm like, let's just do a meeting. Now that's hard because I can't go out and do 10 coffees in a day when I can't do any coffees in a day.

And it's actually far more tiring for me to do Zoom after Zoom after Zoom. But your first pitch, think of it this way, your first pitch is the hook in the mouth. and after that, you've got a long road to reeling that big fish of venture capital end. So all you can really do is tell the who, when, where, why, let people get to know you and try to get the next meeting. A lot of people feel, so I made this mistake all the time in early days of my selling career. I wanted to close.

You know, number one rule of sales, ABC, always be closing. So I was always trying to close. And I learned one day that the only point of a telephone call for the business I was in at the time was to get the first meeting because I could never close on the phone. It wasn't that sort of product. It was too expensive. And so I totally shifted my model

and it was a much more productive thing for me to do because instead of spending an hour trying to close somebody, I spent the minimum amount of time I could to get the in-person meeting. And that converted far better. And those meetings converted far better. And there's a whole methodology thereafter. But net net, you know, pitching for money is selling.

So get in there, tell your story. When people ask questions, it's either because they have, sometimes it will have skepticism. Other times you're just trying to understand. I'll tell you a mistake I used to make as an entrepreneur. I never really pitched venture. I pitched like two people. I bootstrapped till the day of my underwriting IPO.

And I was in a one venture meeting, one of the two, and every time he'd have a point, I'd tell him all he was wrong. I'd tell him the right answer. And I flew back to New York and I went to my guy that introduced me and I said, how'd I do? What do you think? Is he going to invest? He's like, no, he's not going to invest.

He's like, why not? well he said you're too smart huh well that's that's why he should invest i mean of course i'm i was young and proud arrogant idiot that i was um i didn't understand that point at all until much more recently when i realized he wasn't concerned with my intelligence he was concerned with my lack of ability to hear his wisdom the job was not for me to counter his point a with a point b and show him that i'd already thought about it and then he was wrong the point was a dialogue a lot of venture folks will say, is he or she coachable? I used to sort of almost laugh at that question when I was a seed investor. I was like, what does that really mean? I mean, aren't the best entrepreneurs,

the ones that are getting it done and know how to do it themselves. But what I've learned is that it doesn't matter how smart you are. You can only learn from experience, your experience, painful, or somebody else's experience, painful for them, right? So when you've learned, I've spent 25 years as an entrepreneur, I've got a lot of arrows in my back. I learned a lot of things I wish I hadn't, but I lived through them. And if I can help entrepreneurs not experience those hardships, great. But if they can't hear it, then that's going to be hard. So I think in general, investors want to know that whatever accumulated wisdom they have the share will have a shot at being heard. Drifted off a little bit there, but I think it's all relevant to the topic. So

what factors would most set an early stage company apart from others seeking similar funding? You know, always looking for truly outstanding teams. I like novel visions. I'm not interested in sort of somebody going into a field that's made up of many small buildings and building a bigger building. I'm interested in people going into green fields and building a tent and then a small building and then a big building because they were the first people to arrive. I was watching Call the Wild, not a particularly good movie, but at home at 10 o'clock at night I need to do something. And he found this little bitty cabin that was all torn down and it was decrepit and horrible, but it happened to be next to a river of gold. and he was the only one there.

So he had unlimited riches available to him. Find the empty space, mine the gold. That intrigues me, sets things apart. I heard something once from a venture investor when I was a seed investor bringing deals to VCs. And it was, well, they don't have an unfair competitive advantage. I was like, well, by definition, that would be unfair. And they're like, well, I don't care. You have to have an unfair competitive advantage to win.

And I think there's probably a different language for it, but having something that really stands out, maybe you tried 100 things and found that magic way to go to market or who knows what. But there's something that's different in a way that's going to have material impact. And outsize ambition and a need to get somewhere. There's a lot of different levels of business achievement and success. And I want to back the ones that can be freestanding public companies with uncapped upside. Does that mean I don't think it's phenomenal if somebody goes out there and builds a business for $100 million, keeps 80% of it and sells it?

Sounds like a great outcome for that entrepreneur. and for his early investors. It doesn't match what I need to achieve for my own role as I see it at a venture firm where I need to help return the fund. They're both totally viable, but just make sure you matchmake because you want to have the same goals as your investor. If your goal is to build a $200 million business and sell it and make $100 million personally, more power to you.

And if you do that, man, sweet. But that's not what a tier one firm trying to return billions of dollars that LPs is going to need because that 20% stake the VC owns of that $200 million business, $40 million is not going to go a long way to paying back the $3.7 billion fund I'm currently investing on it. So there's lots of different forms of success, but be aware that you want yours to match the form of success that your investor is looking for. Otherwise, you can have a lot of, I don't know, hardship, differences of opinion, friction along the way. So my startup sells multiple SaaS products for restaurants. Ouch, we don't have the bandwidth to handle sales and marketing of all products

at once. What should our strategy be? to prioritize. Well, I say ouch because right now, anything for restaurants has got to be an incredibly tough thing to be doing. Now, having said that, there's a silver lining. Remember that I said that I launched a business on Black Monday. I was driving to a trade show with samples in my car and I thought, came on the radio. I just graduated. And I'm thinking, why am I even going to bother? I might as well throw these samples in the river and go home because this is the biggest correction I've ever seen in my life. In fact, at the time, no one had seen anything that big unless they were alive during the Great Depression.

But it turns out that in difficult times, people need to do two things. They need to increase revenue and they need to decrease costs. So if you can help with either of those, this is a great time to accelerate in, although they're going to be extremely challenged in many ways because they have no business right now and they have no cash flow. I would standardize on what you can achieve. This question would be different if we're talking about a normal time in history, but it's not.

We're at a weird time in history. You need to find the thing that people can buy from you now. And by the way, it says sales and marketing. I don't know what marketing means right now. You're not going to be spending money on ads of any sort. I mean, you're going to have to find bootstrappy ways to go out there and get in front of people, but you're going to have to be super careful in test in tiny ways with any spending you do to make sure it's effective. And you might have to hibernate for a little bit.

But you may need to make some hard choices to make sure you can come out the other side healthy. First, you've got to survive to be able to stabilize, to be able to prosper. At what level of product traction will investors start to be interested? How does this differ across verticals? It differs tremendously. There's actually no answer. It's like the Supreme Court ruling on porn. I can't tell you what it is, but I can tell you when I see it. So in some categories, you need to see huge numbers and some you need to see small. In the old days, I used to be able to tell my enterprise SaaS companies when I was a seed investor, if you get to a million dollars of revenue in a year to 18 months, people are going to be very interested. Now that seems a little more

straightforward or it was pre-COVID. And so I'm not sure if that's as exciting, but I've seen companies sub-million dollars get a lot of excitement. It's one of the things to remember is that ventures ultimately about how can we invest in these phenomenal companies that are either creating new markets that don't exist or attacking incumbents in enormous markets. Because when the outcome gets there, we need these outcomes to be enormous, right? It's probability weighted rational risk in return for ridiculous return. So I'm more interested. in how big it can be, but I do need to see enough data to convince me that you've got the right solution are the, quote, dogs eating the dog food. And that can vary tremendously. On occasion,

I'll look at pre-revenue things and get excited. But, you know, it's, hey, you got to remember what target are you shooting for? You know, you're shooting for a $100 billion outcome. Wow, okay, that's exciting. And you've got your first $10,000 of the revenue per month. Okay. And there's seven other people doing it. Oh, that makes it tough. And most of them are bigger than you. Well, I just now have become a lot less interested. Now, let's put the same $100 billion outcome up there. And you actually have spent the last year on code for some reason. I would encourage you to get to market quicker. But you needed to for some reason in this case. And you've got your first clients and they're big clients and they're doing pilots. And it's clear this is

super valuable to them and nobody else is attacking this space. And you might say all those spaces are taken, but they're not. It's rare, but I find them every once in a while and say, wow, I had no idea that huge industry. Go back five years ago, trucking. No one was touching it. Now everybody's attacking it. So, you know, it's going to vary tremendously. It's also going to vary by investor. You know, there's some categories, social as an example where engagement is important, you know, retention, et cetera, et cetera. Someone once said to me, what are my numbers need to look like? And I was like, well, that depends. He said, well, here's a chart. Does this look good? I said, well, how would I know? Tell me the formulas that go underneath it. He's like, well, I'm

just saying in a general way. It's like, okay, saying in a general way, these certain numbers is like saying, here's a cake, and you're not allowed to take a bite out of it. What's the recipe for the cake? Is it made out of what I expect? Butter and sugar and flour and eggs, and it's delicious? Or is it basically a pile of sawdust covered in icing? I'm really interested in the first one. I'm not interested in the second. So the numbers underneath also matter a lot. So try not to sell a sawdust cake. What role if any will equity crowdfunding play in the venture capital ecosystem? I think venture equity crowdfunding is all good. I just think it's a totally different game.

I mean, you're not going to, it's great for seed or pre-seed. Are you going to venture crowdsource a 15 or 20 or $30 million round? I don't think so. I have no experience in sports other than I get to wear these headsets that make me look like a guy on a sports show, I was told. So I feel better versus just a gamer like I am at home. But I would guess it's like minor leagues versus major. leagues. I'm sure there's all kinds of interesting stuff going on and it gives you the capital to get started and it gets you sort of your, you get you out on the field, get you playing. But I do believe

it's a totally different league when you step up to traditional venture. So I have not yet seen. People have been talking about whether crowdsourced funding or any of this stuff will impact venture and I so far have not seen it happen and it's not like it's new. It's not like it's a year old. It's been around for a while. Very valuable, important for early stage stuff and sometimes additive in an interesting way for later stages as well if you've got the right person helping you with your syndicate. Jason's a great example of that. What are you seeing related to startup valuations and VC terms? Actually, not much has changed here. I've noticed that people are being highly rational and highly fair. I don't think any VC wants to be, at least none that I know, want to be seen as predatory or sort of taking

unfair advantage. I reached out to one of my entrepreneurs. I would love to fund. I funded him personally, but I'd like to see him as an N.A. portfolio company. And he said, yeah, I think people are looking for big discounts. I'm like, no, I would just want to win on merit and pay a fair price. Now, I have no clue what you think a fair price is. So what I would say, though, is maybe some of the euphoria of pre-COVID has gone away, where prices sometimes got so ahead of themselves. So venture always pays ahead. We're never paying what the company's worth today. Imagine that you raised at 10 times revenue from a venture firm. Okay, fine. Now imagine the very next day you tried to sell for that same price, pretty unlikely. Venture is always paying forward because we're going in early and we're

sort of looking at if we can go in now and it can get public here. You know, it's fine to pay. The classic example is $58 million valuation or $85 million valuation for Facebook when later it's worth so much more. So it's not abusive, but I'm seeing less deals being done. I think that's mainly because people work from home and I think you're going to see a tale of two cities. The very best deals are going to be done and they're sometimes going to be done in the same rabid frenzy as before and then you're going to have companies that it's just going to take longer for reasons I talked about earlier, which is, you know, you don't necessarily get to meet the people. But so far, I haven't seen anybody trying to play any tricky games.

Now, that could be in a different category of investor that that's not the case. What kind of marketplaces would you like to see in the next five years? So this goes back to my prior comment. I want huge markets that don't exist yet or huge markets that need to be disrupted. I saw a really cool company in the chemical space. I was intrigued by that. I was surprised by how inefficient technology has been. it cracking into chemicals before now and hopefully they'll be the ones to do it. I mentioned that I'm in

trucking, but building supplies, there's another space I've looked at. I'm looking for categories where the marketplaces are not robust and technology empowered or really technology just hasn't touched it. Like land of the lost, you wander into this place and there's still dinosaurs. I'd love to find those. It's not that easy, but there are some. And I would say that one of my other theses around COVID is that there are no more laggards. Everybody and every company has to use technology now, whether they wanted to or not. So all those resisting, I don't want to be in the cloud, blah, blah, blah, well, good luck. At this point, you're using technology.

And that means that software adoption rates are going to go through the roof, have been going through the roof and probably will continue to. But more importantly, once they're out of that, software's great. You're not going to go back to your old way of doing things if you weren't using software and now you're able to do so. So finding marketplaces that haven't been attacked yet is probably my number one favorite. thing. Do you think people will need a college degree for jobs in the future? You know, I'd love to have my kids get out of college and what I'm saying, a little longer than I'd love, but I'd love for him to finish because I think it's a nice backup to have. If you look at sort of post-2008 unemployment across this country was horrific, but not amongst college educated students. Having said that,

do you need it to get a job? No. Like, your experience can be far more valuable than that education. In a lot of ways, I think that's a very fair thing. There's a lot of vocational training. There's, let's face it, there's not enough engineering talent out there. There's not enough coding talent out there. If you can master that, there should be a place for you. So, you know, I don't really care where you came from or what you did. What I care about is your drive and your tenacity and your vision and your smarts. And I'm not judging your smarts by where you went to school. Obviously, where you went to school is a quick shortcut for sort of a level of achievement that you've had. But, you know, it's, I'd rather have somebody that was top of their class, highly competitive at ABC, unknown university than bottom quartile kid out of an ivy because the absolute secret to entrepreneurial success, the one that is always true is tenacity. If you are not willing to die, if you will not give up, you have a far better chance of survival and success than if you are. When you're willing to give up, you're going to give up. Being an entrepreneur is an incredibly hard thing to do. It's a very painful, very lonely life that takes forever for you to become an overnight success, if you're

lucky enough for that to happen. Luck is required. So your tenacity and drive is critical. I would love one day to fund a purple octopus from Saturn that had all of those characteristics to make it just so incredibly clear. It really does not matter who you are, where you came from, if you have the drive and smarts to make it happen. And I believe that this is a meritocracy. I believe Silicon Valley is the ultimate meritocracy on this planet. I know that BCs sometimes get a hard time for X or Y or Z and diversity and all of those things are important and have to be paid active attention to. But at least the way I look at the world and the people that I fund, it's merit. There's nothing but merit that matters in my view. Post-Wework, how should a tech

start up with profit margins on the smaller side think about building a scalable and ultimately profitable business model? Well, this goes back to you got to show me a path to profitability. You can have tiny margins if you have massive volume and huge growth. So as an example, let's say you're a building supply company. Construction in this country is a huge business, just anything related to construction. So let's say you're pumping $100 billion worth of GMV through your system. As long as you can make a couple points on that, I'm intrigued. The challenges can you make any points on that at all? So what's the path to profitability? The lower margin you are, the more important it is that you have a highly

regulated and controlled cost structure. Like, you've got to be fanatical about making sure you're getting margin and you're saving cost. You know, you've just got to run a tight, tight, tight, tight ship. Margin is freedom. Margin is cash flow. Margin is the lifeblood of your business. The more you have, the more flexibility you have. But you've got to have enough to make it through, particularly now. So low margin is not my favorite by any means. The bigger margin businesses are certainly exciting. But if you've got lower margin, you still, it's incumbent on on you probably more than anybody else to show that path to profitability and show the tightness and rigor and control and discipline. Focus and discipline. Come pretty close behind tenacity in my

sort of checklist of entrepreneurial must-haves. What sectors are you investing in? What are you most excited about nowadays? Like I said, I want to see entrepreneurs that make me say, wow. I have, I've mentioned I have a few theses on what life might look like post-COVID, but I'm not out actively looking to fill those. I think there's been one or two times in my life I've had a thesis I wanted to fund and I went out and funded it. Usually I just wait for smart entrepreneurs to come to me with those visions I think are incredible. Now, having said that, I spent a lot of time thinking about what the world might look like because then the intersection of your idea and vision and my understanding are where it works best for me.

I mean, if you could see the office I'm in right now, it's covered. It's almost at the string connection level of whatever it's called the beautiful mind, just newspaper clippings everywhere. I read three papers a day. I literally get the paper physically and I read it and I cut it with my scissors. Because I'm looking for these little tea leaves of what life might be like and where things could change. You know, there's a billion dollars with a beer getting dumped right now. And I try to think about what does that mean to the brewery industry?

But what could somebody do with a billion dollars with a beer that's about to get dumped? How could you build a business out of that? Anyway, so I spent a lot of time on thinking and reading about what things might be and ingesting, but I'm still looking for your vision because here's something I learned the hard way. no investor can fund an entrepreneur to pursue that investor's version of that entrepreneur's dream. An investor needs to fund the entrepreneur's dream. That's what that entrepreneur is going to build. That's what we want.

So I really want to hear it from you. What sectors? What skill sets do you need to move into VC from a non-investment banking background? This sort of goes back to my last question a while ago about the associate tier. You know, I remember I sat down. down with one of the senior folks here who I'd known casually. And he said, tell me about your journey. And I said, oh, I was an entrepreneur for 25 years. I started my first business. I was 12. My first job when I was 11 where I worked for a quarter in $0.25 in credit. And I used that to get an

inventory so I could launch this business and blah, blah, blah. And then I started this business. And I was one of the first dot-com entrepreneurs in 93. I took the company public in 99. Then I became a seed investor for 10 years. And I had some great successes and people cared. And they started calling me. He said, well, that's a non-repeatable path to venture capital. So I don't have a great answer because my path wasn't one that made it here. And I'm incredibly proud to be at any. This is a phenomenal firm. I love this place.

I've always loved this place. These people are just honorable and smart and focused and focus on the big things. And it's great. But I don't have a lot of, I'd go back to figure out who those recruiters are, get in that funnel, get exposed to people, search for serendipity every chance you can. It's harder now. You know, in the old days, like I know somebody got a job by bumping somebody at a conference. conference, they knew more about their portfolio companies than they did. They knew all the current skinny. They said, hey, you know, we have this small project. Would you do that? And then they

grew and grew and grew. That's harder. But, you know, network like crazy and find out who those recruiters are. In a medium article you wrote, winter is here severely. Don't obsess about the downside. I think about the opportunities. By the way, that was written quite a long time ago, but now it's even probably more prescient. What opportunities have risen so far? What changes are permanent, what changes are temporary. I think this is a magic question that we're all trying to figure out. You know, I think the end of laggards and people using technology and the growth of technology and, you know, one of our competitors says software is eating in the world. I'd say software is eaten an appetizer of the world and now we're seeing it move on to the main course. You're just going to

see such growth. Everything that was not digital before will be digital. Everything that wasn't cloud probably ends up at least partially in the cloud. Work from homes here to stay for people, for not everybody but some and so monitoring that and helping that and empowering that. It's what I have a lot of uncertainty around is the period of time, which we're going to be in a changed world a la COVID and how long it'll take people to forget. I do think humans have an amazing capacity to forget literally everything, no matter how bad it was. If you think about the tragedies of all of history,

there's one or two that people still remember and it's because it usually gets put into movies and reminded of. but it's not that common that people sort of change. I remember I got, there was a time period when they shut down all the cruise ships because the norah virus, nobody would shake hands. People started shaking hands pretty quickly thereafter. No more elbow bumps. Nobody, you know, use Purell. By the way, at that point in time, which was a long time ago, we went to the store

and bought mounds of Purell. It wasn't that different. It was different in a lot of ways, but in terms of the sort of cleanliness. So, you know, let's assume it takes two years for us to get to a vaccine and then people sort of go on their merry way. In the interim, how much enforcement of rigor will there be? I mean, it's really hard to predict. It's such a diverse population of people out there.

But I think on a corporate side, what I would simplify this as, everything people thought they might do, they've now been forced to try. Remote work, digitization, cloud, they've had no choice. And they found out that it works really well. So we'll see how that evolves. But I think it'll evolve in a very, very positive way. What are some books you recommend today? So I am a, I'm both a read everything or read nothing sort of guy.

I live across the street from a library. I can't do this anymore, but I used to walk over there, check out six or eight books, go home, read a couple of chapters of each one on the weekend, take back the ones that weren't interesting to me. As I said, I read three newspapers a day. I have an app where I've got a stunning number of newspapers of magazines. And I read books all the time. In fact, I have a, my normal background is my library at home. which was a consideration, but I wanted to make sure everybody knew where I was. So you get to see that, hey, it's NIA and hey, I'm Ben. There's books that are valuable to various points, but you're

never going to know which one is valuable to you in advance unless you've got a specific need. So if you're struggling with pricing, there's a book called predictably irrational that I found good. If you're struggling with sort of the evolution of technology in a startup environment, crossing the chasm is great. But one of the most valuable books I ever read was it wasn't even the book. I didn't even read the whole thing. I read one or two writings by Ralph Waldo Emerson and he wrote a piece which basically said when you believe what is true for you and your heart of hearts is true for all men, that is genius. And that was an incredibly telling thing for me because I was a, you know, as I mentioned, I was an entrepreneur since age of 12. And when you're that young and you're an entrepreneur,

people give you a lot of compliments. Oh, you're so smart. Oh, look at what you're doing. You're so adventurous. I'd be like, just like everybody else. And what that message helped me understand, was not that I'm so special or I'm so different than everybody else, but it's that what was true for me was true for others. It just took them years to see it. I mean, I started a web business in 1993. I will tell you the cohort of folks that started web businesses 93 was incredibly small. I was too early. I've been too early in everything I've ever done in my life, and it's worked out pretty damn well. So it helped me sort of have the strength of my own convictions. And one of the challenges I think for venture capitalists in general, and this is

similar for entrepreneurs, is having the strength of your own convictions, because that means going out there when other people think you're crazy, or that's not the right thing to do, or they disagree with you, just face to face, and being willing to honor your convictions and later be proven right. It's hard, really, really hard. So I'm a voracious reader. I'm always looking for tidbits. Another book that was critical for me was Snow Crash, which sort of helped me think about, I read that in 94, who really changed my view of how the web would have. evolve in a way that was material to me actually ending up being a public company. I love Stevens and all those newer books are just so damn long. I can't really. I finish them,

but, man, it's a lot of work. So hard science, science fiction is useful because it's very predictive in some cases and can give people visions. There's an enormous amount of companies that have been started that are based on hard science, science fiction concepts, or named after them. So I just read with abundance. But having said that, I go back to, or nothing. What I don't think is that valuable is I wrote for tech crimes for a long time, but it's not. that great to read industry news. Like, do you really need to know about some of these valuation? Valuations meaningless. The last valuation is the one that matters. You raise $180 million and exit zero. Well, I think the zero is a lot more important than they're higher than 80 million.

You raise zero and exit for $180 million. That's a different equation. So you have a lot to do as an entrepreneur. I don't know how much time you have to do a whole lot of reading. It could be your version of a vacation. Look, when I was an entrepreneur, I never believed in the concept of work-life balance. The first time I achieved work-life balance, you know, so as an entrepreneur for all that time, I would just work and work and work. I believed everything else was immaterial. We used to have this debate, a buddy of mine and I that had another business, that there was work and there was leisure. And if it wasn't work, it wasn't worth anything. And that people that were involved in leisure were certainly wasting their time. I mean, I'm saying that was an arrogant comment.

But that was sort of how my buddy and I that both had these businesses felt about the world. And I stayed that way for a really, really long time. It wasn't until I had my first child, my wife and I cut a deal that the weekends would be sacred. She said, you can work all nighters all week long, but give us the weekends. And I honored that and I have pretty much to this day. Although when my entrepreneurs need me, I just tell them they have to come by the house. So I've had to work around for that now that my kids are older. Are there areas that are non-investable at the moment, whether it is overcrowded, overpriced, overpriced, or the prospects, great, impacted by COVID? I don't want to ever say anything's off limits. It's just, that there's areas that are tough. You know, when you're, like the person said, they're selling SaaS to restaurants. And that's a really tough place to be. And I don't know what that landscape looks like later.

So, you know, ignorance is a hard way to invest. By ignorance, I'm explicitly meaning lack of knowledge, right? If I don't know what the world's going to look like, it's tough to pull the trigger. Now, having said that, I mentioned that I had a company that I thought would probably be doing really badly, and it's doing quite well or doing poorly, but it's actually doing quite well.

and it's in the entertainment slash ticketing slash event space. And I was like, wow, this is stunning. But they have a really smart way of doing things. So I'm always willing to hear the stories. Do you have any instances where a founder's positive or negative trade signals have influenced a deal decision on reflection? Has that proven to be an educator? All right, I'll give you two quick examples.

Well, one, if you're, I was a young, arrogant entrepreneur. So I have a pretty high bar for putting up with young arrogant entrepreneurs because it's usually just bluster. It's just a way to sort of protect themselves. I was there. I thought I was smarter than I was and all of that. So I'm really hard to get pushed past that limit. But if you do, man, that's tough.

It doesn't happen very often. I can only remember two or three times in the 13 years. But at that point, it's not just that you've totally frustrated me, but I'm thinking, how are you going to be able to do business? It's just, I mean, yes, if you're the 1% of the 1% of brilliance, sure, people will put up with it. But there's a big difference between arrogance and confidence. People like to see confident people succeed. Everybody wants to see an arrogant person fail. So that's happened. There's been one time, though, when I made an investment decision that I still

struggle with. It was a seed investment of mine. A young entrepreneur pitched me back in the days of seed, you know, it took me at least three meetings to make a decision. My approach was, I cannot get to yes in one meeting. I can get to know in one meeting or I can get to, I want to spend more time with you. And I got to, I want to spend more time with you three times with this guy and I was ready to invest. In fact, I won't name the company, but I had my check in my pocket. I actually closed my check. I wanted to shake somebody's hand. I wanted to toast them. I wanted to buy them a glass of wine or a non-alcoholic beverage, if that was their preference. But, you know, even though these checks weren't huge, they were more than I'd ever spent on a car. I mean, I think that's a

reasonable size transaction. I want to honor it. I want to celebrate the event. I still want to do closing dinners when I do investments today. Anyway, on the third meeting, check in pocket. I say, oh, how's it going with company X with that deal you did? I said, oh, yeah, it wasn't really a deal so much it was a conversation. I'm picking through my notes. You told me you did a deal with company X. Well, but not really a deal. We were just talking.

I was like, okay, it's too bad. It didn't come there. Look, I just wanted to meet you face to face to tell you I'm going to pass. I would rather give you the respect of saying, you'm not going to invest than to just call you and tell you that. So I apologize me. I hope you understand. So that company, because to me, and maybe my bar is too high, to me the entrepreneur had lied to me. It wasn't an exaggeration.

He said he had done a deal with that company. And I think a lot about whether my tolerance for that was too refined, meaning was I too picky. Maybe I should just say, oh, he exaggerated a little. Company's worth about $2 billion today. But that entrepreneur got fired. He didn't make it. And I'm not a guy that fires entrepreneurs. And I wouldn't have had the power to if I wanted to.

So I could argue that my call on the human was right and my call on the business was wrong. And I still today don't know whether I think that was a mistake. And so I struggle with that one because sometimes the opportunities are so big. Maybe I should have overlooked that. Maybe I'm being too picky. Maybe I've set my own bar too high. I haven't lied since I was a teenager. And I guess I infer that of others, which I know is unreasonable.

But I do trust until proven otherwise. But once proven otherwise, man, I never forget. and I go to great lengths to try to correct the situation. All right, there's one more in here. What's your biggest exit, best investment? How did you source the deal? Could you tell, bores, blah, blah, blah. Well, Lending Club went out in public was probably my biggest because I went in the very first

round and it was worth about $5 billion at the time. There was a moment in because it was public, I got liquidity there. So, you know, I have that multiple. Benefits went from the same thing to $5 billion, but now we don't know where that's worth. I guess on a multiple basis, if I take those two out, which were, We're sort of north of 100x, 68x, 58x, 60X, 40X sizes of that sort. Where did I source them? Literally everywhere.

I mean, you just got to turn over 1,000 rocks. I found Lending Club by listening to the radio driving to work. I was listening to either NPR or WCBS on a morning in 2007 when they had just started and Renaud was being interviewed. I'm like, oh, my God, this is going to be huge. I got to find this guy. And I spent a whole bunch of time getting to them. And then, admittedly, multiple months trying to figure out whether I,

I could put my money at work here because I ended up personally investing when my own firm at the time, a different firm than NIA passed. And so it was a big decision for me. It was one of the larger checks I've ever written. NIA is a health care focused VC. So that's not accurate. NIA is a single fund which has both a technology practice and a health care practice, which is quite rare. It's probably around two-thirds tech, one-third med tech. And at-home health care or aging can be argued to be a new marketplace.

telemedicine. So this is definitely true. I mean, I think this goes to my no laggards. One of the thing that's interesting is they relaxed the sort of regulatory requirements on home doctor connectivity via phone or chat because it's all about the HIPAA stuff and now everybody's using it. I don't see how anybody goes back. Why would I go into my doctor to show them some bump on my face when I could just say, hey, what's this? Oh, that's a pimple band. I said, okay, thank you. So it is going to be pretty exciting. Now, having said that, while the teams meet together from time to time, we do practice separately on an investment. Sometimes we overlap. You know, Omata Health, the company that I personally funded was a company NIA funded as well, and it was an overlap

between the med tech team and the traditional tech team. So where there's an opportunity, I will say that getting both sides excited is sort of three times difficult as getting one, but that's a huge sector. What's your take on the future of learning? This goes a little bit to is a college requirement. I think we're seeing all kinds of things happen right now. I can tell you from my own personal experience. I've got three kids at home, two, that we're supposed to be in college and one that's in high school, I would love for them to get more than just digital learning. I mean, I'm not going to be an effective homeschooler. It doesn't seem like we've perfected this. I think it's a big unknown area that I probably am way over my skis to try to comment

on. But I think lots of things are changing. And explicit skills like coding are certainly teachable remotely, as are so many things, but they're also applicable remotely. You can prove that you're cogent. You can prove that you're capable, and you can probably get a job from just doing that. Trucking is a trillion-dollar industry. so I understand your interest. I've got a promising portfolio company in the space, so I'm curious what aspects. So I've already funded a trucking marketplace called Transfix,

which is awesome. Anybody that wants to, oh, I didn't put it up here, but my Twitter handle is at B. Narasen, first initial last name. You can DM me if you've got a business, you want to pitch me. Give me the elevator pitch.

I'll reply. It doesn't mean I'll want to know a lot more. I might say, not a fit, or I might say, hey, great, send me the deck, or I might say, tell me a bit more. Do you still do angel investments outside of N. does NDA invest in advertising, supported cloud platforms?

What's the traction required? Lots of questions there. My job is to find great companies for N.A. In some rare instances where a company is too early for N.E. And we have passed, I will make a personal investment. I've done that a handful of times. But my job and what occupies me all day,

every day is finding the next great thing and putting NIA's capital to work to make those companies that much better by the use of our capital. And hopefully the expertise we can bring to bear and there's a lot we can bring. The question of do we invest in advertising supported cloud platforms is too broad for me to opine on in theory, but advertising support is always more challenging than other ways of getting

revenue. And if it's SaaS, are you getting both and what sort of traction? You know, it's too broad. Elevator pitch got to get me a little more specific on the who, what, when, where, why there. What do you think of the cannabis industry? I don't look at it. It's probably prohibited by our. our sin clause anyway. And even if it wasn't, it's just not something that intrigues me. I'm

nothing against it. Not my kind of thing. And lastly, the latest tweets from Ben Narrison. There you go. Okay, so at B. Narresen, I'm already tagged in there. You know how to reach me. DM me if need be. And thank you all for tuning in. Thanks for listening to Ben Narrison's Ask Me Anything. If you'd like to participate in weekly AMAs and discuss all aspects of startup life with Jason and our community of 30,000 founders, join us. at this weekend startups.com slash slack.