1Mby1M Virtual Accelerator Investor Forum: With Nihal Mehta of ENIAC Ventures (Part 3)

Sramana Mitra: Very well. It’s definitely the age of the incumbents these days on the B2C side.

Nihal Mehta: Consumer venture funds are actually going down in size because gone are the days of Instagram, WhatsApp-like billion-plus acquisitions. Google and Facebook will just try to build it or buy it before it gets big enough. The return profile of these startups tends to go down. You have to have a smaller fund size to return your fund.

On the enterprise side, there are so many more opportunities. On the SaaS side, you have Salesforce, SAP, and Adobe competing for the MarTech stack or the CRM stack. There’re still huge gaps where entrepreneurs can grow very quickly. That being said, I read a stat on Facebook recently. 40% of millennials have removed Facebook from their phones. Snapchat is not doing well either. I think there’s a real opportunity for very large breakout unicorns over the next few years.

Sramana Mitra: What is the geographical focus of your fund?

Nihal Mehta: We are geography agnostic. Our headquarters is San Francisco but we have a large office in New York as well. We’re bi-coastal. We invest anywhere in North America. Our networks are in North America, so that’s where we can help accelerate companies. About a quarter is in the Bay Area, about a quarter in New York, about a quarter in Boston, and quarter for others. We’re seeing markets like Los Angeles, Salt Lake City, Austin, Vancouver, Seattle. That 25% is probably going to grow faster than the others.

Sramana Mitra: Let’s talk about some of the highlights of your portfolio. What I’d like to do is give our audience a bit of an insight into how you think about investments. Talk about some of the case studies. Give us some feel for why it attracted you. What was it doing that attracted you?

Nihal Mehta: We’re lucky to have a great full-stack engineering founding team. One of our very first investments ended up selling to Airbnb. One thing that’s reflective about that company is the team is full stack. The founding team can build and ship products by themselves. That’s one thing that we look at within the founders.

Typically, there’s a technical co-founder and a business co-founder. They can build and ship products by themselves. Ultimately, they’ll raise capital and they’ll hire people better than them but in the beginning it’s really important for them to iterate very quickly by themselves. Building a startup is very hard. We know it firsthand. Having somebody to balance ideas off of and to get a hug from and give a hug to is incredibly important during this journey. We like more than one founder.

We also like it if they’ve done this before together and even tasted success or failure together. The number one killer of startups at early stage is founder infighting. If you can de-risk that by looking for working history, then that’s what we prefer. Another case study based on all of these things that I just said is the company called Boxed. The founding team actually sold the company to Zynga and left Zynga to start Boxed. We led the seed investment in 2012. That was six years ago.

They just raised a $110 million round. They’re growing very quickly. They are a bulk direct-to-consumer e-commerce  company without the membership fees. The team did it before. They had a small taste of success. They wanted to go bigger. What they’re building is very different, but it doesn’t matter. It’s 90% about team. That’s what we look for. We have many incredible companies that have very similar profiles.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Nihal Mehta of ENIAC Ventures
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