Investor Discussion Series: Ben Narasin of NEA

Ben Narasin is a Venture Partner at NEA where he focuses on investing in early stage emerging markets and technologies.  His overarching focus in seeking new investments is in his words, “to find founders who make me say wow”.  

Author’s note, Ben is one of the most engaging VC’s I’ve ever been fortunate enough to speak with. If you get a chance to see him speak I highly recommend making it a priority. 

What trends are you currently investing in, especially any that are more under the radar?

There isn’t much overlooked today with so much money and people in the space.  For example, Artificial Intelligence and Machine Learning is popular but every startup claims they have that so you have to figure out who has that for real.

Industrial IoT is a big, interesting category including robotics.  The way I think about the world is different.  Some investors look at one category of things.  I’m more centered around the entrepreneur and finding a vision that makes me say wow.  They show me a new vision of the future.  Its not a category investing method but one based around human beings.

Areas I don’t focus on are crypto, security, cannabis, and medtech.  You need a very specialized expertise to get really good at investing in these spaces.

Blockchain will create a ton of value, but at this point there is so much hype.  Its currently speculation, not investing.  Right now you are over paying because something is on the blockchain.

Right now you want to look at enormous industries that are antiquated and need to be disrupted.  For example, one of my investments, Transfix is disrupting trucker brokerage which is an enormous but antiquated industry.

If something is hot now it’s to late.  You need to be in the business of what’s hot tomorrow.  What’s next is where venture makes its money.   

Where and how do you source your investments?

You find these entrepreneurs everywhere but as an investor we have to see a stunning number of pitches to get there.  Active investors will see over 1,000 pitches a year.  From that you will make 1 or 2 investments.

The best opportunities come from referrals from entrepreneurs you already invested in.  I also make sure I speak at every opportunity I get and stick around afterward for entrepreneurs to talk to me.  

I actually found LendingClub while driving to work listening to the local NPR.  Spent time tracking the founder down.  Pushed until I got to the founder. 

What do you look for when Investing?

I look for 5 things: People, People, People, Great Ideas, Enormous market

When I was a seed investor I funded roughly 80 companies over a decade, half of which raised Series A from tier 1 firms.  The company is proving a thesis off a seed round - Series A is what allows you to build a business

What’s Overhyped today from an investment standpoint?

ICOs and coin based things.   

What’s the key signal or two you look at when thinking you want to invest in an early startup, what ultimately convinces you?

The decision making process is the most important part in venture investing - the outcome is less important than that you had a good process. Luck matters and influences this. 

What are some resources you use to stay up to date on a space?

Go to a lot of conferences and trade shows.  Learn from every meeting.  Even in a horrific pitch there may be some nugget you take away such as a trend or competitor they are up against. I read from books in the library across sci fi, fiction, non-fiction. Read the newspapers.  You do everything.

Any advice to young venture capitalists and angel investors out there in sourcing deals?

I was an institutional seed investor, never an angel investor.  You need to take it very seriously.  Never lose your fear when making an investment.  You do all the work you can to get to a point of comfort.

People obsess excessively over valuation (what you pay and what you sell for are all that matter).   Exercise tremendous discipline.  Its ok to go with your gut but your gut needs to be some level of training, knowledge and experience. 

Any predictions for the next year or two?

Deflation is much more likely than a pop.  No idea how long this will continue.  I don’t invest for something short term.  We invest in companies that can be world class so assume a 7-10 year journey.  Can’t imagine in the next 7-10 years we don’t see at least one correction.

Your job is to wait for the right ball to swing at, wait for the right pitch.  As an investor you aren’t penalized for when you don’t swing but what you strike out at. 

Anything else you think investors or entrepreneurs should know?

It comes down to trusting your gut as long as your gut is based on experience. It’s both science and art.  Early stage is more art than science. Later stage is science.