The sale of my company Vungle for $780MM in 2019 created opportunities for me to invest in other startups. At first, those investments were made with people close to me, but as I have progressed, I have wanted to create a process and structure to formalize these efforts. In order to do that, I reached out to my most highly respected investors, including Ben Narasin, Venture Partner at NEA.
Ben invested in Vungle and has been investing for over 10 years. He has backed some of the most innovative companies, including Dropcam, Lending Club, Kabbage, TellApart, and Zenefits, so I felt that it would be helpful to get his perspective as I pursue more investment opportunities. The following summarizes our conversation about the nuances of different types of investors.
Angel Investors versus “Institutional Seed Investors”
Ben talked about the differences between an angel investor and an institutional seed investor and how, surprisingly, angel investors don’t really have a great track record for profitability. In order to make money consistently, you need to approach your investments as an institutional seed investor by applying rigor to your investing efforts. He clarified, saying, “…the vast majority of angels are ‘spray and pray.’ They throw a hundred darts, and they hope one of them lands on Google. It almost never does. They usually lose most or all of their money.”
He reflected on some history of angel investing, explaining, “The first super angel was Ron Conway. Ron Conway made an enormous number of investments. I think the quote I’ve heard was 300. He got Google and Facebook out of that, but he didn’t really get much else. So, without both of those, I’m not sure how that portfolio would have looked.” Ben talked about the conditional elements that contributed to Conway’s success–massive access and impeccable timing. Ron was “super-connected.” He came in very early, so he paid very low prices. Ben noted that today’s investor would have an incredibly difficult time replicating his success.
There are some exceptions to the concept that angel investors don’t usually make money, which he admitted: “Any angel that took part in the first rounds of Uber did just fine. You know, you couldn’t make enough mistakes not to make your money back if you had a decent chunk in Uber.”
Advisor vs Investor
There are times when one might take an advisory role, investing more time and expertise versus money into a business, and Ben shared what he has heard about the time commitment for such an arrangement. He said, “All my friends that went in as advisors in the start have said that pretty much they lean on you a lot in the beginning, then a lot less, and then, never.”
In general, Ben has found that being in an advisory role without being an investor in the business is not something he pursues, saying, “My job, full-time all day, every day, is to look for the best opportunities for NEA.”
The Right Number of Deals and How To Think About Those Deals
I asked if he had any guidelines for the number of deals or overall dollar value of deals that he does, and he explained that he uses a formula of 10% of his total net worth. He talked about having to be willing to lose it all: “It didn’t impact how many deals a year I would do or anything else … What it impacted was my own agreement with myself that this was totally at-risk money…. any investment I’ve ever made I’ve believed has the opportunity to be a zero, just like it has the opportunity to be huge…. in the first 8 years I did 80 deals. It worked out to about 7 to 10 deals a year personally.”
How to Protect/Achieve Work/Life Balance
One of the big struggles for me is how to maintain proper work/life balance. When I was building Vungle, it was a 24/7 endeavor. L and when other investors we talk about limitations on their time, I didn’t understand the need to respect family time. In my head, I thought “a.m.
Ben talked about advocating for work life balance, saying, “You should protect your lifestyle. You have the right to, for multiple reasons. One, you’ve achieved it as an entrepreneur. Your advice, therefore, should be of some meaningful value, but you’re also putting in capital. As somebody that’s putting in capital, you want to be able to help, but you’re entitled to say, ‘I can only…’
If you wanted to, you could say, ‘I’m only a source of capital.’ I wouldn’t encourage that because:
- You’re not going to get the best deals.
- It’s not the right way to do things in my opinion
- Why will the entrepreneur even care?”
His advice was to simply decide what portion of my life I’m willing to devote to entrepreneurial/VC endeavors and then managed to that.
Time in is another factor that Ben doesn’t get too concerned about. He talked about getting to look at opportunities when you can, describing a possible investing time-frame scenario as, “‘Here’s how I’ve organized my life. This time is available for entrepreneurs in a general way. However, I have more than one founder. Definitely reach out. I will get to you as soon as I can.’ …Your goal and value isn’t in being real-time available. Your goal and value, I believe, is in being available for things that rise to the level that you can add value to. And except in the rare instance where the time-sensitivity is extreme, then tomorrow is fine. Next week is fine. Coffee at your favorite place is fine.”
My interview with Ben covered a multitude of topics. If you’d like to read the other topics we discussed, you can read them here:
Part 1: Talking With Giants: Advice For What To Look For In A Startup from Ben Narasin
Part 2: Talking with Giants: What a VC Should Provide To A Startup Entrepreneur (Besides Money)
Part 4: Talking with Giants: How to Talk to Potential Investors with Ben Narasin
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