1Mby1M Virtual Accelerator Investor Forum: With Anshu Sharma (Part 3)

Sramana Mitra: We’ve covered Nutanix extensively. Our community knows Nutanix very well. At what stage did you get involved with Nutanix?

Anshu Sharma: It was the stage at which it was just an idea. I had known and interacted with Dheeraj at Salesforce while he was at his previous company. He and I had done some work at Oracle. When Dheeraj started incubating, I was in the group of people that was the first check in.

From this investment, I learned that if you back a team that understands the market they’re going after, things work out well. Essentially, that set the template for me for every other investment.

Sramana Mitra: Anything else that is not as far along?

Anshu Sharma: I think there’re lots of interesting companies. One of them is Algolia which is Search-as-a-Service. It’s a narrow niche in some ways, because essentially you’re creating search index and serving them up. Again, having been at Oracle and Salesforce, I’ve learned that while there’s a lot of open source technology available to set up your own search index, running something like that on a day-to-day basis is highly difficult even for a company as large as Salesforce.

When I met the team, they had gone through YC at that point. It was a no-brainer that this company would do really well. It was a non-obvious problem and a lot of the rest of the market had given up on it in the sense that you’ve got all this open source technologies that everybody uses, so maybe there’s not a real business there. The company is doing great.

The other interesting aspect about Algolia is, they started out in France and moved their business operations to the US and still operate in a globally distributed way where a lot of the marketing and sales functions are led from Silicon Valley and a lot of engineering is primarily done in France.

Sramana Mitra: How did they meet you or how did you meet them?

Anshu Sharma: I had just left Salesforce. I was friends with my buddies at Storm Ventures where I subsequently became an investing venture partner. They had asked me to look at the company and help them make a decision about investing. It’s worked out well so far.

Sramana Mitra: You started out introducing them as a niche. Can you elaborate on that? I’ll give you a bit more context about what I’m thinking about.

Anshu Sharma: I love niches.

Sramana Mitra: Can you help me frame your definition of niche from the perspective of TAM? There’s a prevalent philosophy in Silicon Valley that TAM needs to be over a billion dollars. Some investors don’t even want to invest unless it is a $10 billion TAM. I’m thinking, “How many of those are there?” On the other hand, there are so many niches where you can build such solid businesses. How do you parse this dichotomy?

Anshu Sharma: In some ways, almost every business that you’re trying to build, by definition, is going to be a niche. Online bookstores are a niche and helping small and midsized companies track their leads on the Internet is also a niche. Niches are actually not investable. I will also not invest in a company that is genuinely going after a niche.

The difference between a company that’s starting out in a niche which is investable versus a niche that is not investable is the imagination and the ability of the founder. There may have been five people who wanted to start an online bookstore. When another VC firm asks you what you are trying to build, if your answer is a bookstore and I press you, “Is that a big enough business?” Then you say, “Yes. All I’m going to do is sell books.”

I’m just not interested. There are a lot of angel investors who are interested in companies which will get a $50 million exit. I’m not interested in a founding team that doesn’t want to shoot after something much larger. I always jokingly tell people, “You give me a business that has a path to even $10 million in revenue, and I can give you a path to a billion.”

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Anshu Sharma
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