1Mby1M Virtual Accelerator Investor Forum: With Yanev Suissa of SineWave Ventures (Part 2)

Sramana Mitra: Which is why I’m probing you on this topic.

Yanev Suissa: My experience with NEA is that they are a great investor at the seed stage. There’s typically a partner or a principal level person who sponsors the seed stage deal. That partner or principal-level person will still be active. Usually, seed companies don’t have boards. They end up on the boards to be helpful to answer questions, to help you grow. If the seed company does well and graduates to a series A, then that’s when the board seat would happen.

Sramana Mitra: This is more like neither of you are taking board seats. I don’t completely agree with the statement that seed companies don’t have a board because most seed companies we work with do have boards. But I think the model you’re describing of how you and NEA and any other permutation of fund works is neither of you take a board seat at the seed stage. If it graduates to series A, then you take a board seat.

Yanev Suissa: I would say there’s one caveat. Sometimes VCs do take board seats. We invest in domestic companies. I know you guys have a very international network that has variations in how angel rounds are structured. There’s always a group of advisors. They’re not necessarily a board. Sometimes they’re formalized into a board seat structure. What I usually see is three to five key advisers, and these can be either angels or strategically relevant people.

Sramana Mitra: Absolutely, there’s usually a Board of Advisors. There’s a lot of micro-VCs that take board seats.

Yanev Suissa: I think some of the big VC’s will take board seats if you have them and it makes sense. Often what I find in these rounds, domestically at least, is that they end up being advisers.

Sramana Mitra: I think you are absolutely right. The large funds in seed stage cannot take board seats due to the economics of having such big funds to manage and such small amounts of capital deployed. It does not make sense for them to take board seats.

For the micro-VC managing smaller funds whose main agenda is working with the seed, post-seed, and sometimes pre-seed. Their agenda is to make that company successful from that point on and they are taking board seats, which actually segues into the point that we are seeing a lot of. I’d like to get your comment on this. When NEA funded my company in 1998, there used to be seed and Series A.

Now there is friends and family, pre-seed, seed, post-seed, pre-Series A. Firms are specializing. We talk to smaller VCs who are focusing on post-seed. Somebody else is focusing on pre-Series A. What is the difference between post-seed and pre-Series A? They have articulated for themselves what the metrics are by their definition. That is the trend of the industry.

There are 300 or 400 micro-VC funds operating in this general spectrum of early stage investment. How do you see this segmentation from your point of view? While you said you operate in seed, if you were to look at this segmentation, where would your sweet spot be?

Yanev Suissa: First, I’d congratulate you on raising money in the 1998 timeframe and then going through the craziness what happened economically.

I have a particular opinion here that I don’t think is necessarily what every one of the press or the popular buzzword would share, but I think it’s probably true. Maybe I’ll put it in two parts. The first part is, you have a lot of dumb money in the venture world, particularly in the past few years.

The reason for it is because it was, and still is, very hard to make money in the public markets. A lot of the big investment shops, big mutual funds, and these typical public market investors were like, “We’re investors, so let’s move earlier in the chain. Companies are taking longer to go public, so we’ll just invest privately.” What they didn’t quite understand is that what VCs do is not really finance.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Yanev Suissa of SineWave Ventures
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