1Mby1M Virtual Accelerator Investor Forum: With Scott Sandell of NEA (Part 4)

Sramana Mitra: The counterpoint to that is entrepreneurship is happening at a much larger scale. It has become cool to be entrepreneurs. When we were starting out in the mid-90’s, it wasn’t cool. It was cool to go work for somebody else. If you drop out of MIT or Stanford to start a company, that’s a badge of honor. That’s nothing to apologize for. If you choose to go back, fine. If you don’t choose to go back, no problem.

It has become standard fare in a career choice. As a result, the level of experimentation around the world has exploded, which brings us to our next question. NEA actually had a global agenda for a long time now. Of course, 1Mby1M is a global program. What is your view of entrepreneurship on a global scale? What are you thinking? What is NEA thinking in terms of leveraging that opportunity and working with entrepreneurs around the world?

Scott Sandell: We’ve been doing it for a long time. It became obvious to us in the mid-90’s that the ingredients for successful startups and the ability to build large and valuable companies was no longer the province only of entrepreneurs in the United States. Our eyes were opened to this for a couple of reasons. One of which is, so many of the entrepreneurs we back had come from other countries. In the US, as you may know, 49% of entrepreneurs backed by venture capital firms were born from somewhere else.

That’s a huge part of the reason why the United States has been a successful hotbed of entrepreneurship for the last 50 years. We saw through their eyes and their stories what was happening elsewhere. WebEx is the reason why I got to China in the first place. WebEx had 800 engineers in China early on because the technology foundation was very complex and required a whole amount of engineering which was, frankly, unaffordable especially in the bootstrapping stage of the company.

Min Zhu and his wife went to China and set up three development centers in China before anybody thought about doing that. It was a key reason why the company was successful. We had many entrepreneurs from India. We visited these places and we saw that the ingredients for success were more than prevalent. I would say today, we are on the precipice of a much more profound globalization of entrepreneurship. That has everything to do with the cloud and mobile infrastructure which has now been built.

As you know, billions of consumers around the world have smartphones which look roughly like the power of a mainframe when we were born. Most importantly, as it relates to the entrepreneurial opportunity, they provide a platform for building businesses anywhere. We’re certainly seeing through our network businesses being created in places that people haven’t thought of as hotbeds of entrepreneurship. By that, I mean countries in Africa, Middle East, and even Western Europe. We’re seeing incredible things coming out of Western Europe.

Sramana Mitra: What is your investment strategy vis-a-vis all that? Do you invest in a certain set of geographies?

Scott Sandell: Our strategy is to essentially investigate new opportunities through investments. We started out in China making investments before we set up offices. We’ve made an investment in Brazil. We have a couple of investments in Europe and the Middle East. Over time, we will establish more of a presence and more places around the world to support those efforts.

Sramana Mitra: You are open to investing in remote geographies even without an office.

Scott Sandell: One of my investments last year was in Dubai and I’ve never been to Dubai. That might sound radically irresponsible to the ears of our limited partners but I’m comfortable with that.

Sramana Mitra: Whatever it may sound to your limited partners, it sounds like music to the ears of my entrepreneurs here because they are all over the place. Silicon Valley had this extremely parochial habit of not wanting to invest outside of a 30-minute drive from Sandhill Road. It’s very good to see that.

Scott Sandell: My view is if you want to be a global venture capital firm in the next 50 years, it’s not an option to just stay in Silicon Valley. Silicon Valley is wonderful and we’re thrilled to be here, but NEA started as a national venture capital firm with an office in Baltimore and one in San Francisco and three partners. That meant that those partners had to figure out how to operate with multiple offices. That created the DNA and the business practices that made it much more natural and effective for us to start expanding overseas.

Sramana Mitra: As I’m listening to this, I want to tell you one story that is intensely personal where NEA played a gigantic role. My second company was spun out of my first company. The first company was a services company. I built the product, prototyped the product, and spun it out. A lot of the engineering was done in India.

I’m talking about the 1997 to 1999 timeframe. At that time, building a product in India was not acceptable to Silicon Valley. I had a dreadful time raising money in Silicon Valley. I was fundraising for the first time. NEA didn’t have a problem with my engineering team being in India. We closed the NEA funding in January of 1999. If you fast forward that by about seven or eight years, the values have completely changed.

If you went out to shop a business plan with investors, they will turn around and ask where your engineering team is and what your India strategy is. It was comical. I was sitting there not knowing whether to laugh or cry, because I had gone through such hell. It’s not so much fun to be ahead of time. The fact that NEA bailed me out of that situation is something that I’m very grateful for.

Scott Sandell: Thank you. You were one of the people that educated us about why that was a good idea. That’s how we found out about India – through our entrepreneurs.

Sramana Mitra: Thank you for your time.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Scott Sandell of NEA
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