Nakul Mandan has spent most of the last five years as a VP at Battery Ventures. Earlier this summer, though, he quietly joined Lightspeed Venture Partners, where he’s focusing on early- and growth-stage software-as-a-service investments as a “principal partner.” We asked him about some of the considerations involved in switching from one powerful venture firm to another, and what he was recruited to do.
You recently moved from Battery Ventures to Lightspeed. What’s it like to switch firms on Sand Hill?
In a way, it’s more of the same in terms of the daily routine – figure out thesis areas you like, invest in teams attacking those areas, and then support them in every way possible. But each firm has its own DNA in terms of how they think of risk-reward, the nature of risks they’re comfortable taking, and how the investment team works together pre- and post-investment. Understanding that DNA and finding alignment is key.
The other aspect of the switch is to ensure a smooth transition for the entrepreneurs you’re working with, within the portfolio and outside. This is extremely important. You want to make sure that there is somebody to take over an ongoing relationship — board role, or otherwise — and represent the firm in the same way as you would have.
You were recruited to Lightspeed to help build the firm’s SaaS practice. Is SaaS still hot after the public SaaS companies were hurt in public markets in March? What has the industry learned from that slight correction?
I’m not sure I’d make a good investor if I invested in early-stage startups based on the current public market reaction to a particular category. Just a year or so ago, consumer was supposed to be out of vogue because the long-awaited Facebook IPO didn’t do well initially. But now Facebook, Twitter, Uber, and Airbnb are all kicking ass and so consumer is back.
I’m sure SaaS, or for that matter any other category, will see similar ups and downs. But if the business is fundamentally creating value for its customers, and customers are willing to pay a price for that value that eventually leads to strong profitability, then the business can see through those ups and downs in valuations.
What do you see as the key differences between web-based versus mobile-only SaaS opportunities today?
Similar to the consumer world, in mobile, less is more. For mobile apps to be useable, they need to be extremely easy to navigate and focused on a couple of core features that they’re great for. Sometimes that requires trimming the functionality down. For instance, collaboration software on mobile will look closer to Whatsapp than Facebook. For companies trying to redefine existing workflows like CRM or sales productivity or collaboration on mobile, that’s something to keep in mind.
The challenge is how do you deliver enough value while keeping it simple to use on mobile. To that extent, I think there’s more opportunity for mobile-first rather than mobile-only SaaS startups. A lot of enterprise use cases can benefit from the ease of use of a mobile app focused on one or two core features but also need a more comprehensive workflow that is better delivered via a web app to support the end-to-end needs of the business user.
We always hear about seed deals for consumer startups. How do you see the seed ecosystem working for enterprise-focused founders?
I think it’s a pretty robust ecosystem. There are lots of good angels and seed funds that are focused on enterprise startups. There’s also a lot of good talent coming out of all the recently acquired enterprise companies, like Eloqua, Yammer, ExactTarget, Successfactors, etc.
My sense is that enterprise will never be the area that gets written about the most in tech blogs, but it continues to be the area where most of the early-stage investment dollars go, and where a lot of innovation is happening.
What’s the biggest change you’ve seen in your five years on Sand Hill Road? And, why is this important for both investors and founders to understand?
The biggest change for me is how much more mature startups are, and are expected to be, by the time they pitch their Series A. With the cost of building a product going down, and a greater influx of seed-stage capital, I’m regularly seeing startups raise seed rounds that give them two-plus years of runway. This gives them more time to tweak their initial product, and get more feedback from customers before they hit the road for a Series A. Founders need to keep that in mind as they think about the timing of their Series A. And investors need to accordingly adjust their expectations on valuations and round size, given that startups are coming to them with more proven out.
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