Karan Mehandru, a venture capitalist at Trinity Ventures, had only started investing in 2007, but has had quite the 2019. In the span of only one year, his early-stage investments Cohesity, Outreach, and Auth0, achieved “unicorn” billion-dollar
valuations. At that threshold, he now has more unicorns in his individual portfolio than the vast majority of venture firms can claim as a whole. As an Indian-Canadian, Mehandru is a unique investor not just for his global outlook and track record for picking early winners, but also, perhaps more importantly, for his outspoken commitment to values-driven decision making. He also has the insistence that being a good investor and a good person are not mutually exclusive. These traits make him, too, a bit of a unicorn within the venture ecosystem.
With venture capital trends changing every few months, Mehandru gives insight on where the industry as a whole is heading.
New Power Dynamics
For years, VC’s and founders had an imbalanced power dynamic. By holding the purse strings, VC’s could act however they wanted without consequence, and founders would still have to cozy up to them in order to get the funding they needed. “Over the past few years, venture dollars have skyrocketed to a point where they flow like water to promising founders. At the same time,
some members of venture capital’s old guard have received increasing scrutiny for their behavior, not just the headline, grabbing bad behavior we all know about, but also the more subtle arrogant behavior that won’t cost them their jobs, but do and should. This should make founders think twice before partnering with them. Slowly but surely, more VCs are realizing that they need to offer more than just money. They also need to provide value — and values — to account for the most important resource of all: human capital,” says Mehandru
A Focus On Value And Values
Mehandru has been a big advocate for pushing investors to think more like operators rather than passive check writers, “First, I’d like for more investors to realize that they’re service providers, and it’s their job to help their portfolio companies succeed. They’re not there just to pick winners. They should be mentoring the entire executive team and providing hands-on operational expertise to help them become winners. Second, I’d like to see more focus on values. We’ve seen loud and clear what happens when companies are instructed to grow at all costs. Company executives and their investors need to think through the potential negative social impacts of their decisions. This includes not just the first-order impacts, but longer-term, unintended consequences as well. I spend a lot of time thinking about the future of work, and social concerns come into play loud and clear as we consider how social inequality could be widened by automation and AI.”
Embracing Diversity Of Every Kind
The new unicorns of 2019 look different from their predecessors. They’re different types of companies created by different kinds of founders, based in different locations. An increasing number of highly valued companies are based outside the usual tech hubs like the San Francisco Bay Area, and an increasing number are founded by women and under-represented groups.
“Diverse venture teams, much like all business teams, outperform non-diverse teams. Yet, the majority of VCs are white males with similar educational, professional and socioeconomic backgrounds. Such homogeneity in backgrounds can lead to homogeneity in thinking; worse yet, it’s often flawed. While groups like All Raise and Diversity VC are improving the status quo, it’s not happening fast enough. Far too few VCs come from diverse or disadvantaged backgrounds, and still, only nine percent of venture partners are women. Founders deserve partners who understand and can empathize with their unique perspectives across all dimensions – gender and ethnic, national and socioeconomic backgrounds, as well as points of view, skillsets, and professional and personal experiences. Founders who partner with firms whose leaders come from diverse backgrounds and work collaboratively (rather than as silos, as some firms do) benefit from a portfolio of diverse thought and expertise that can help startups avoid pitfalls and identify and seize strategic opportunities,” explains Mehandru.