1Mby1M Virtual Accelerator Investor Forum: With Tim Guleri, Managing Director at Sierra Ventures 2021 (Part 2)

Sramana Mitra: Would you invest in concepts?

Tim Guleri: Yes, we do and we have. The bar for the experience of the team in that particular pain point that they are going after is extremely high for those investment bets. You are betting on the future based on the experiences that they might have had, so that is why the bar is high.

Sramana Mitra: The theme that I am hearing from everyone willing to do a concept stage investment has two things. First, the team has done it before and knows what they are doing. Second, sometimes they have an extraordinary level of domain knowledge for first-time entrepreneur teams.

That is also a scenario that people are considering in concept stage investing. Are those the only two criteria for you or is there anything else that you consider?

Tim Guleri: There are two ways that I look at it. The first bucket is that it has to be a team in a domain or knowledge in a particular space that we know. They might have done it inside an interesting company.

A great example of that is a company that I did seed investment in. This team of three people had built an application monitoring infrastructure inside of PayPal, which is PayPal’s core infrastructure today in an autonomous way. When that came out, we funded them. They are already doing it at PayPal and they could start doing it for the rest of the world. That is one example.

The other one is what I would call business model innovation, so this would be a team that has experienced something prior, but they are hitting a problem in today’s market with a different go-to-market orientation.

We have seen innovations in that modality as well. Those would be the two ways that we look at pre-revenue and pre-traction investments that we do.

Sramana Mitra: Talk to me about the innovation that you are most interested in. There is business model innovation, business technology innovation, and process innovation. The application monitoring that you mentioned is probably a process innovation more than deep technology innovation.

The one that I sent you recently is a sales process innovation. How do you weigh the different kinds of innovation and the defensibility of the deals in those kinds of innovation?

Tim Guleri: The answer will probably surprise you. I think that the business model innovation is the most important fundamental moat that one needs to think about as an entrepreneur.

Technical innovation is great to have but, if you think about companies that get from $100 million to $200 million in ARR, these are the ones that have business model innovation. They are the ones that can survive the competition and the market. If I can get a company that has a deep technical moat, I will take that.

When I have a deep domain technical moat, then I try to help the entrepreneur start putting the foundations of business model distribution innovation. If I can find an early-stage company that already has distribution innovation, I would love those. I love those types of startups because they are harder to do than technical innovations.

I’ve had the pleasure of writing the first check into a company and taking them public. When you look at a company from a public market length, the business innovation trumps the technical innovation.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Tim Guleri, Managing Director at Sierra Ventures 2021
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