1Mby1M Virtual Accelerator Investor Forum: With Ashmeet Sidana, Chief Engineer at Engineering Capital (Part 2)

Sramana Mitra: How do you look at teams for something like this? Is it somebody coming out of a domain with deep insights into solving the problem where they haven’t written the product, but they have enough domain knowledge to signal to you and the investors that they know what they are talking about?

Ashmeet Sidana: Since I invest so early, they almost have never written a product. They may have some samples of prototypes, but it’s rare because I am so early. In terms of the selection of the team, they need to have some form of technical insight or domain knowledge to take on a challenge like this. This is in addition to the usual characteristic of a great entrepreneur.

There are some characteristics that I consider horizontal characteristics. Entrepreneurs need to have grit and perseverance. They have to be a bit iconoclastic. They have to be willing to break the rules in some interesting ways and think outside the box. Those are horizontal characteristics that an entrepreneur has to have.

On top of that, with my particular space and the companies I’m looking at, I’m looking for some form of technical expertise. That is critical. That is why I call the firm venture capital for engineers. That doesn’t mean that they need to have a degree from MIT. That would be amazing and I would be happy to back people who have been to MIT, but what I mean is that they have to be engineers. They have to have an understanding of software, computer science, and the ability to take on a challenge where maybe you are combining some aspects of design, operating systems, and networking.

Sramana Mitra: I’m going to ask you something that I am observing and something I have started covering extensively. I’m interested in it because I think it’s a powerful trend. This is the Platform-as-a-Service trend.

Historically, it was Salesforce that introduced this into the market. They have a robust platform in which a lot of entrepreneurs have built their product. Some of them have built huge companies. Veeva is my favorite example. This company was built with $4 million in capital and they raised capital but never really used it.

This company was built on that stack. They addressed something huge and executed phenomenally. Now they are doing their products in their stack. I’m hearing this trend from many different corners of our industry. Twilio is doing a communication path strategy.

Shopify is doing an eCommerce application path strategy. There are a whole lot of examples. I think that this is one of the powerful trends of the business today. When you think about this in the context of deep tech – often you are doing an infrastructure layer – how do you process this trend?

Ashmeet Sidana: If you ignore my current work for a second and just look at the state of the IT industry right now, for the first time in about four or five decades we are seeing innovation in all layers of that stack. For a long time, people worked on chips, computer systems, operating systems, or applications.

This was a five or ten year period where that was the only innovation that occurred and everything else was pretty static. This changed with the emergence of the cloud and the acceptance of people doing Infrastructure-as-a-Service, open-source, and lower cost startups.

A lot of trends came together which opened up all layers of the stack to innovation. Today, as we sit here, I can meet with companies who are building new forms of chips and even attempting to break the Harvard architecture. I meet with networking companies that are trying to do things outside of TCP/IP.

I meet Infrastructure-as-a-Service companies. Of course, we have Microsoft, Amazon, and Google as providers, but we also have Oracle, IBM, and others who are trying to do that. We also have companies, which you are referring to, which is for all the traffic path layers like Salesforce where businesses create companies on top of them.

Right at the top, we have SaaS companies that are innovating applications and building interesting businesses around a particular domain or solution. Innovation is occurring in all stages.

When I evaluate a company, I look at where this company’s predominant area of innovation is. If most of the innovation is in the end-user and end problem, then don’t innovate in the other layers. You don’t have to take that risk.

If you are a healthcare-focused SaaS provider, to build a Salesforce platform, for example, is a reasonable choice. They could have built it on the Amazon platform. It could have been an equally reasonable choice. They could have been equally successful on a different platform.

If you are making an innovation where you are leveraging something deeper down the stack, then you have to ask yourself, “Where should I do this? What interface do I want to provide which brings out my innovation and allows my creativity to flourish in the best possible way?”

That is what you need to think about? It’s hard. It’s not a simple straightforward answer. You may have a great insight into an algorithm and the right answer might be to build a chip for it. Today, it’s possible to do that.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Ashmeet Sidana, Chief Engineer at Engineering Capital
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