Recently, Brian Armstrong (Co-founder and CEO of Coinbase) did a tweetstorm on how there are way too many investors, vs builders/ operators, in Silicon Valley. And how founders in their prime-age are opting to become full-time investors, rather than starting-up again, even after a relatively small exit.
Brian makes some good points about a trend, though short-term in my view, that even I am seeing in the Valley. Here are my thoughts on why this is happening and how it will eventually get corrected (I did my own tweetstorm with these views).
I think this is a side-effect of the last decade of over-liquidity across markets. Companies got over-funded, assets got over-paid for, specific skillsets (mostly engineers) have gotten astronomical salaries relative to their skills & experience. Also, there is no inherent entry-barrier to becoming an angel/ seed investor, provided you have “some” liquidity, especially as cost of starting businesses has come down a lot and early rounds have gotten increasingly syndicated/ fragmented across multiple small investors.
Given excess liquidity, a person who ordinarily would have been an individual angel, is now getting a shot at raising a small fund. While institutions would still keep a high bar, there are enough friends/ colleagues/ relatives willing to commit funds to ride the tech gravy train.
So am not surprised that many are jumping on the professional investing bandwagon, instead of starting-up/ operating companies. What many wouldn’t realize is:
This asset class has a 10 year feedback loop. You might end up concluding after a decade, that you aren’t really that good as an investor.
While raising a “small” first fund from personal well-wishers is relatively easy, scaling up to 2nd fund and beyond, esp. getting institutions to buy-in, is much harder.
Once you raise other people’s money, you are locked-in for many, many years. Not easy to switch career tracks.
Unlike a startup, it’s really hard to “pivot” or “reset” a fund. If your thesis/ strategy turns out to be faulty, or your Partner team chemistry doesn’t work out for some reason, you are still going to be stuck with these mistakes for a relatively long period of time.
In professional investing, showing commitment & consistency over a long period of time is critical. Yet, this is really hard to do, especially when you have decades of your career ahead of you.
In the end, market forces will weed out short-term players and restore balance. This could start once the current boom cycle turns around and liquidity becomes tight.
My personal philosophy — the world is shaped by “Builders”, not “Investors”. Why would you want to be a full-time cheerleader, when you can play the actual game?
Am super-pumped to welcome Nishant Gairola to the Operators Studio team, as a Student Associate. He is currently pursuing his MBA at IESE Business School in Barcelona, and has been a serial founder for a decade, building multiple companies from grounds-up.
Nishant will support me across core investing tracks for Operators Studio, including ramping-up deal flow, evaluating interesting investment opportunities and supporting current portfolio companies on their most pressing challenges. Nishant and I will also work together to further refine OS positioning, value proposition & differentiation in the global angel/ seed investing space, including cross-border themes. Finally, with his presence in Spain, OS will now have access to the European market, in addition to my deep US-China-India networks. I am particularly excited to explore Eastern European markets, as I have met some special engineering & founder talent from there over the last year.
Excited to be adding such high-quality young talent to the Operators Studio journey. If you are a founder, investor or any professional from the venture ecosystem looking to collaborate with Operators Studio, especially in Europe, please feel free to reach out to Nishant!
I am really excited to kick-off 2019 by introducing ‘Operators Studio’ — my endeavor to invest in & support founders globally, by being with them in the trenches right from a really early stage. As you will see on the website, Operators Studio is all about “Backing gritty founders who are solving real problems “ — supporting innovative technology startups through early capital, deep operating expertise, global networks and a personal sounding board.
The Genesis
While I left my Venture Capital career 5 years back to become a full-time operator, I still wanted to keep that one element that I most enjoyed as a VC, in my life — partnering with entrepreneurs to solve really interesting problems and build innovation-driven companies that move the needle for the world. As I transformed myself from an ‘investor’ to a ‘builder’, I also started investing in startups in their angel/ seed rounds, supporting founders at a deep operating level, working with them through their biggest tactical & strategic challenges, as well as most importantly, being a friend & sounding board to them.
Over last 5 years, I ended up investing in & supporting >15 startups across the world, along with my full-time operating stints. As I travel on the path to discovering my own differentiated world-view, investing style and what really excites me both as an operator & investor, I thought this is the perfect time to institutionalize my efforts. Hence, Operators Studio was born!
2. How is the Operators Studio Mandate Unique?
In my experience as a VC, angel and tech operator across US, China and India over last decade, a key gap I have observed is that the entire business & venture environment leans towards only a certain kind of business — that which is attractive to institutional investors. This means characteristics such as potential ‘moonshots’, going after humongous market sizes (as per guesswork), exit potential that moves the needle for institutional funds, and aligning with trends in-vogue (AI, ML, AR, VR, Crypto etc.).
Due to these filters, an entire gamut of tech businesses that are solving true ‘operating’ problems for customers/ users, which are often unsexy and lag behind latest trends, get completely overlooked. By the way, in majority of cases, these customer-centric businesses are highly innovative in their own right, and can often be built to be economically-viable without overt dependence on external capital. And in the process, generate solid financial returns and entrepreneurial gratification for all stakeholders over the long term.
The Mission of Operators Studio is to back exactly these kind of companies — those that put the customer’s problems first, leverage practical tech innovation to solve them, and are founded by tech warriors — entrepreneurs who are visionary, humble, resourceful and believers in deep execution. It doesn’t matter if a space or product is considered unsexy, unattractive or out-of-trend by the financial ecosystem or media — as long as the company is solving a problem that matters for the world, customers/ users are vouching for it, and founders are willing to be in it for the long haul and build the company in a way that’s most suited for realizing their vision, Operators Studio will be a believer in it!
3. How does Operators Studio Add Value to Founders?
a) Early & “patient” capital — will mostly invest in friends & family/ formal angel/ seed rounds; will be flexible from a stage perspective (‘Day 0’ co-founders coming together, pre-PMF, post-PMF to even Series A and beyond).
It takes at least a decade for a business to realize its true potential. We take an “evergreen” approach, supporting founders for whatever time it takes for them to realize their vision.
b) Operating guidance — deep-dive product sessions, go-to-market strategy, hiring, user acquisition, customer introductions, pitch decks, investor connects, exit discussions.
c) Global networks — helping companies go global via access to market knowledge, business expertise and networks across the “tripod” — USA, India and China.
Operators Studio will be flexible from a mode-of-involvement perspective, as long as its Mission is being fulfilled — in addition to investing directly in companies, this could involve direct ‘Day 0’ incubation, becoming an LP in other funds to get access to the most-promising companies, partnering with high-quality accelerators/ incubators, collaborating with established tech companies to unlock synergies etc.
4. Why This Name?
I have consciously avoided names like ABC Ventures or XYZ Capital. Operators Studio stands for a fresh venture-building approach —to me, this name is very significant as it communicates key tenets of this approach:
Operators — looking for companies that are solving real operating problems for customers/ users, backing entrepreneurs that have a rigorous operating mind-set, supporting founders by adding operating value to companies, helping them work through on-ground operating challenges rather than giving theoretical advice.
Studio — rather than being a conventional investing entity or a personal asset allocator, the vision for Operators Studio is inspired from boutique movie studio models (the likes of Hello Sunshine founded by Reese Witherspoon; Blinding Edge Pictures by M. Night Shyamalan; or Color Yellow Productions by Aanand L Rai). Its ethos is based on how these studios operate — looking for a unique story (problem to be solved) to tell to a specific audience (target customer), assembling/ supporting a team that brings to the table diverse skillsets needed to tell this story most effectively (backing gritty, execution-focused founders) and executing at economics most optimized for the story to be delivered most efficiently (capital efficiency, driving optimal returns).
5. Active Portfolio
My entire portfolio of companies is now under the Operators Studio umbrella. Following are the companies (currently-active) we are proud to have backed so far (in alphabetical order):
1) Artifacia (Toronto/ Bangalore) — AI-powered platform that helps e-commerce brands create and manage shoppable photos
3) Hate2wait (Gurgaon) — queue management product for SMBs and large enterprises
4) Instashift (Estonia) — global peer-to-peer platform to buy/ sell cryptocurrencies
5) Lets Venture (Bangalore) — India’s most trusted platform for angel investing and startup fundraising
6) My Ally (San Francisco Bay Area) — world’s only AI Recruiting solution for fully Automated Interview Scheduling and Recruitment Coordination
7) Scandid (Pune) — eCommerce deals & price comparison platform, now offering omni-channel commerce solutions for the global travel retail market
8) 91Springboard (Delhi) — category-leading co-working space in India
9) Trailze (Tel Aviv/ San Francisco) — making tough-terrain outdoor navigation easy (hikes, trails etc.)
10) Tydy (Gurgaon) — global onboarding & training product suite for the distributed modern workforce, bite-sized+gamified
11) Widget (San Francisco Bay Area) — transforming images and documents into customer communication channels, all without apps, phone nos. or forms
12) Yulu (Bangalore) — re-defining urban mobility in India via smart dockless bike sharing system
6. The Future
Am super-psyched to grow Operators Studio as a passion-driven parallel track, along-side my main operating career. I see tremendous opportunities for using tech innovation to solve really interesting problems and build outstanding companies, in markets as diverse as US, India and China. At the same time, am excited at the growth prospects of the current set of portfolio companies, several of whom are already emerging as category leaders.
Whether you are a founder, startup employee, established tech exec, angel, VC or corp dev professional, am eager to connect with you — for feedback, to exchange notes, collaborate or just brainstorm. You can Email me, as well as connect with me on Twitter and LinkedIn.
I thank all the founders, startup teams, investors as well as other tech ecosystem professionals that I have had the privilege to work with over the past decade. Here’s to leveraging entrepreneurship + tech innovation to solve the world’s most pressing problems over the next 50 years.
PS: for more details on Operators Studio, check out our website.
Read an interesting WSJ article on how Goldman Sachs investment bankers moonlight as VCs.
Drawing on this article, one of my key observations over the last decade has been how the present global economic system drives the “rich keep getting richer” phenomenon. It’s most likely a by-product of capitalism and free markets the way they have been created & have subsequently evolved. The beneficiaries of these systems are obviously, not incented to complain.
With the way technology is penetrating our planet, and that too in a highly disruptive way, I see even more momentum in this “rich getting richer” phenomenon in coming years. Preferential access to 1) information, 2) knowledge & 3) networks will keep catalyzing this trend. Combine this with additional leverage generated via access to capital.
Have thought about how this can be broken — IMHO, a way is to provide as much “access” to education as possible, which in turn, will better setup citizens to create access for themselves to the aforementioned 3 elements.
Would love to discuss more thoughts on how else can this “rich keep getting richer” phenomenon be constructively broken globally.
Have been thinking a lot lately on what true leadership really means. Back in Jan 2014, I moved from doing Venture Capital in India to becoming a tech operator in Silicon Valley. Life has been a roller coaster since then…to say the least. Met people that willingly ‘punt’ on quality talent, as well as jacka**es that suck the life out of them. Worked with some awesome individuals, as well as shockingly dysfunctional teams. Experienced world changing visions, as well as weak products that did no justice to them. Each day has been fun, gut-wrenching and full of countless moments wherein I have questioned all my assumptions…and life choices.
In particular, one question, more than others, stares at my face daily — “What does true leadership mean”? No matter how many management books, expert blogs and leadership training you go through, none of them gives you solutions to the ambiguous problems that life throws at us — what to do when a team member who is well-intentioned and great at the job, is actually destroying team culture? How do you give feedback to a senior leader? How do you communicate in a different country’s culture where even the language isn’t shared? How do you react in a political work environment — do you participate or stay away from it?
To counter these situations, the advice always is “to do the right thing”. But what is the “right thing”? Isn’t the “right thing” always contextual? What if your “right thing” is different from my “right thing”, given our different personal compasses?
I have no answers to these questions — perhaps, navigating these challenges successfully day-after-day, year-after-year and decade-after-decade is what creates true leaders. Standing today, to me it seems true leadership is a path, a journey, a series of battles that need to be fought (not necessarily won!). You have to be brave enough to walk down this path, and keep walking. Even with all the business knowledge, models, frameworks and networks in the world, nothing can quite prepare you for this journey. You just have to experience it, fall down, cry, curse, get up, learn from it, move on and make the best of it. And maybe…just maybe…years later…you would have moved closer to becoming a true leader. After all, it took more than 25 years each for Mahatma Gandhi and Nelson Mandela. And they were still questioned!!
Personally, as I have started walking down this path over last few years, following Robin Sharma and Sadhguru has given me fundamental concepts and energy that has helped me tremendously. What has helped you as you walk down your own path? What is your idea of true leadership and doing the “right thing”? Would love to hear your thoughts.
Will leave you with this quote by Robin Sharma that has left a huge impact on me — “To lead is to serve”.
