1Mby1M Virtual Accelerator Investor Forum: With Vinny Lingham of NewTown Partners (Part 3)

Sramana Mitra: What about strategic? What role do you see Naspers playing? Naspers has played a big role in exits in India. What is their position in Africa?

Vinny Lingham: Naspers is a really good investment house. They’re really good at later stage and not early stage.

Sramana Mitra: They’re good at exits.

Vinny Lingham: Yes. For early stage founders, Naspers is not probably the best exit you could have just because they don’t do very well at managing early stage companies towards exit.

Sramana Mitra: The next questions are not specific to South Africa. It’s more in the context of your global activities. These are trend questions. How do you process the current investment climate where capital is moving further and further upstream? The traditional VCs are raising bigger and bigger funds. How does the seed investor or entrepreneur mitigate the Series A gap?

Vinny Lingham: The Series A gap has been crushing for many companies who have early stage traction, big vision, great team, but can’t raise capital. We raised capital a year ago. I raised a seed round but I couldn’t raise a Series A. I got a term sheet, but we didn’t like the vision that investors had for the company.

They tell you it’s about the team and that business changes over time. When it comes down to reality, they look at the business at that point in time. It’s so hard to convince VCs of something that hasn’t happened yet. The funny thing is when I’m going to the sales, they say, “Vinny, you’re great, but we can’t get our head around this Blockchain identity stuff.” That’s exactly the opposite of “It’s all about the team”.

The Series A crunch has been because VCs don’t have the convictions these days. Unfortunately, a lot of the VCs are just a bunch of MBA kids who are now working for VC funds.

Sramana Mitra: The market is full of early stage VCs – pre-seed, seed, post-seed, pre-Series A. Almost everybody who has had a Principal job at a larger fund and didn’t make Partner had started a small VC fund.

Vinny Lingham: Exactly.

Sramana Mitra: The other trend question is how do you parse the unicorn mania. All of these 500 little funds are looking for unicorns. Unicorns, by definition, are rare. My question is, as a seed investor if you also chase unicorns, you could also get buried under layers of liquidation preferences.

How do you protect yourself? One way to protect yourself is what you said earlier – do the early stage and exit into the later stages. That’s what takes care of that. Is that your primary strategy?

Vinny Lingham: As an investor, I have a lonesome view on things. Unicorns aren’t liquid. My strategy is, just make good investments behind good teams and just be patient. If the opportunity comes to exit, sure. When I write a check for an investment, I kiss the money goodbye. I don’t expect to see it anytime soon. If you put the pressure on yourself to see it soon, you’re not ready to be an investor.

Sramana Mitra: Is NewTown Partners your own money or does it have limited partners?

Vinny Lingham: It’s just me and my partner.

Sramana Mitra: You’re not answerable to limited partners.

Vinny Lingham: Yes.

Sramana Mitra: That’s very helpful. In 2017, lots of stuff were built. There are so many ideas out there that seem like a feature of Facebook or Google. These are niche things. In some cases, these businesses have to be built with the idea that you’ll put in maximum of $1 million and then the company gets sold for $5 million to $15 million. How do you view these types of opportunities?

Vinny Lingham: If you make startups a career for yourself and as a long-term learning, I think you have to take it in your stride. It’s probably one of the things where you just see where the dice rolls. You have to learn what works for you and what doesn’t work for you. Some people get too attached to the outcome.

Sramana Mitra: Are you willing to invest in these kinds of companies? You probably know because you have seen plenty of companies. You have been around. You’re not this young MBA who has no experience of doing startups. You can tell that this probably is not going to be a unicorn. Would you invest in something like that?

Vinny Lingham: Probably not. I go after things that I’m pretty certain is probably a bad idea, but if it comes off, it’s going to be a big one.

Sramana Mitra: All right. Thank you for your time.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Vinny Lingham of NewTown Partners
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