Lesson: Picking Winners with Ullas Naik

Step #1 Thesis: Diminish dilution impact with this enterprise seed model

Companies these days can be built on a very limited amount of capital, or at least they can get early traction on limited capital. They can build a product, they can hire a team, and they can get to meaningful customer traction. It could be pilot deployments or it could be maybe even some actual deployments and they can do that on sub-$500,000 in total capital raised. This was not possible five years ago.

The reason why I am now a seed investor with a seed stage platform is that I can invest in these companies, relatively small dollars, and get them to a very meaningful business milestone based upon those dollars and then raise money, have the company raise money, at a much higher valuation, on account of which it diminishes the dilution impact to my fund. This was not possible, again, five years ago. Five years ago a company needed $30-40 million upfront very early in it’s lifecycle in order to build the product, build the team and get some early customer traction.

Nowadays you can do that on $5 million or less and then you can raise growth equity beyond that at much higher valuations, on account of which the dilution impact to firms like mine are much lower so we end up owning a meaningful chunk of the company at the time that the exit happens. So the model is much more relevant today than it was five years ago.

I started off in the investing world as an angel investor during the ‘90s. After that I joined a traditional venture capital firm called “Globespan Capital”. Globespan Capital was a very traditional Series A, Series B oriented firm and as the funds grew in size, the focus of the firm started to become more mid-stage focused and I liked early stage investing so I was always craving and wanting to get back to the early stage side of things.

I left Globespan a couple of years ago with the intent of investing my own money as an angel investor, and as I started to angel invest, these realizations around capital-light business building started to dawn on me, especially as they apply to the business side of things. It was fairly abundantly clear that consumer businesses could be built with limited capital, but it was becoming more clear to me that business-oriented companies could get built on limited capital and I thought that there needed to be a venture capital firm targeted at that, being an early stage investor. I wanted to do something at the seed stage.

I was also angel investing pretty actively over the last couple of years and that also played into trying to build a seed stage investment platform, as opposed to building something that’s sort of early and mid-stage investment platform. Right now, this firm is completely focused on early stage.

Streamlined Ventures is a seed stage venture capital firm. We invest in seed stage companies aimed at predominantly business use cases. It could be business applications or it could be business application infrastructure, but with a key overlay. We’re looking for extreme scale businesses, which means that businesses that can grow very rapidly with very limited or a lot of capital. Not everything makes it through the filter but the companies that do make it through the filter hopefully start to demonstrate real scale potential very early in their evolution.