1Mby1M Virtual Accelerator Investor Forum: With Ashmeet Sidana, Chief Engineer at Engineering Capital (Part 1)

Ashmeet Sidana, Chief Engineer at Engineering Capital, is the founder of a small venture firm that we have a great deal of respect for, and a personal friend. This is a wonderful conversation.

Sramana Mitra: We will start today’s session with a conversation with Ashmeet Sidana, Chief Engineer at Engineering Capital. That is an unusual title for a venture capitalist. I love the fact that Ashmeet loves deep tech and is capable of handling deep technology. This conversation is expected to be technical.

Ashmeet, let’s catch up. It’s been a while. Bring us up to speed on what’s happening with the fund? Have you rolled funds to a new fund? What fund size are you working with? Reemphasize the investment thesis for us.  

Ashmeet Sidana: Despite the global pandemic and all the trouble that we have had in the world, Engineering Capital has thrived. I raised my third fund earlier this year, which is a $60 million fund. I continue to invest in the early stages as the first investor in companies that are taking technical risks.

Sramana Mitra: I want to dig in on the stage question more since we all have a lot more experience in doing this. I’m asking you this from an entrepreneur’s point of view and would like to hear how you process it as an investor.

If you are trying to do something deeply technical, it still takes a significant amount of time to build something consequential. What stage of the evolution of such an entrepreneur’s journey would you step in?

Ashmeet Sidana: Deep tech is not a binary state where you are either deep or not. It’s a continuum. If you think about someone taking science risks, they’re trying to invent something new from scratch perhaps like biotechnology to something that you can whip up in a week, weekend, or a month.

That’s the continuum that I see in companies. In Engineering Capital, I focus on companies that are taking fewer science risks but more engineering risks. In other words, we are not sure exactly how to build it, but we do know that it can be built. There is some risk in engineering.

Another way of thinking about it is, if you are a year or two from revenue. That’s another way of bounding the problem. If you are five years away, you are in the pure science category. If you are a month away, then there isn’t enough risk. That’s almost too easy and trivial.

Sramana Mitra: I see the difference between the risks. That’s the business risk and that is not your domain. Your domain is deep tech. Given that perspective, how do you validate?

Assuming that there are a lot of great experienced engineers, tools, stacks that make the engineering risk manageable, there is still the market risk. What methodology do you apply today to do market risk validation?

Ashmeet Sidana: Just because I take engineering risk doesn’t mean that I don’t take market risk. The market risk comes after you have engineered the product, and so I’m also taking that on.

However, I have the luxury that in a few rare cases, with the interesting companies that are best suited to my portfolio, I could reduce the market risk because there is a need or a demand for the problem which is not solved because someone has not engineered it. Let me give an example in my current portfolio.

I have a company called Refunction which has built a solution to automatically refactor software, perhaps legacy software or software written in Java, which has over two million lines of code. We can automatically refactor that into a cloud made of a stack.

We can break it into containers. The containers can talk to each other over networks and we can auto-scale. All of this is done automatically. When I first met the company and we discussed the problem, it was clear to me that the market risk was very low.

When I talked to customers, they were absolutely interested in a solution like this. They said they would pay six or seven figures if they could get a product like this available to them. In hindsight, I perceived the market risk to be low, but the technical risk to be high. This is a hard problem.

Imagine millions of codes written over a decade by large teams who have changed or are no longer in the company and you have to break it into separate executables that are going to run in an entirely new stack. Most people thought that it couldn’t be done.

I talked to my friends at Google and Microsoft and they said that it could not be done but I showed the solution and they said, “Could we buy the company?” That is a great example of high technical risk but low market risk.

This segment is part 1 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Ashmeet Sidana, Chief Engineer at Engineering Capital
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