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Kumar: Multi-stage seed checks are option value that harms struggling startups
“For a lot of these multi-stage firms, the capital that they put into a company in the early stages is just an option value. And if it's just an option value, then if things don't go well, that company is going to have an incredibly difficult time at raising ca…”
Kumar: Multi-stage firms use seed checks as training wheels for new partners
“In a lot of cases, I feel that some of the multi-stage firms coming in and investing at the seed stage is not a function of a calculated strategy, but more of essentially providing a safe playground and training wheels for some of the new folks who are there.”
Kumar: Coined the term pre-seed around 2013 as seed rounds grew
“I actually kind of coined the pre-seed term at one point in, I think in 2013, 2014 because I saw the seed market kind of evolving where it was becoming a two million to three million dollar round, and I was like, wait, these things are changing, and so there h…”
Kumar: Overpricing early rounds harms startups more than extra dilution
“My advice to them is to actually go for a slightly lower valuation, because whatever valuation they take is setting the bar for their next round of financing, and it's also setting the bar for what kind of exit they can have. And so trying to optimize that, I …”
Kumar: Groupthink and consensus are the biggest enemies for venture firms
“I think the biggest enemy for venture firms is actually groupthink, and that kind of almost goes back to the solo GP versus a partnership type of a model. There's a lot of benefits to having partners and people Questioning and serving as a, as checks and balan…”
Kumar: Early-stage startups should embrace remote teams
“And so now I, when I'm talking to companies that I would invest in, I'm totally comfortable with them having remote teams. And in fact, I advocate that they should have remote teams.”
Kumar: Late-stage mega rounds create unhealthy startups
“The mega funding rounds, the hundreds of millions of dollars coming into companies in the late stage. I think in a lot of cases, those lead to unhealthy companies”
Kumar: Mid-2000s Sand Hill Road VCs avoided tech risk and operational backgrounds
“Most of the funds were trying to do investments that were three to four million dollars. They were not taking technology risk. A lot of the new people on Sand Hill at that time were not coming from a startup or an operating background.”
Kumar: K9 Ventures refuses to invest using convertible notes
“And I walk away from deals all day long based on price and structure, so I also don't do convertible notes.”
Manu Kumar: Momentum investing comes too late for seed VCs
“Like to me, momentum investing is like by the time something has already gained momentum, at least for someone investing at my stage, it's already too late.”
Kumar: Carnegie Mellon's academics are as rigorous as or superior to Stanford
“Academically, I would say that CMU is absolutely at par, and if not, maybe in some cases, more rigorous than Stanford.”
Kumar: Startup value creation has shifted primarily to private markets
“If you look at the new venture landscape, the value creation has really shifted to private markets. Companies add more value while they are still private than sometimes, and they do even after they've gone public.”
Kumar: K9 Ventures operates on a five-year fund cycle
“First my investment period is five years. So I only go out to market with a new fund every five years and not every two to three years.”
Kumar details portfolio counts for K9 Ventures Funds I, II, and III
“Fund one had about 19 portfolio companies. Fund two had 14 portfolio companies, and I'm about a third of the way in fund three, where we have about six investments so far, and I still have several years to go before we'll go out to market for the next fund.”
Kumar: K9 Ventures will not raise valuations to chase competitive deals
“I have absolutely zero fear of missing out, and so if there's a company that is got multiple term sheets or offers even at the pre-seed stage and stuff like, I'm not going to be Chasing that deal and trying to move up in valuation in order to win that deal.”
Kumar: K9 LPs push for concentrated, high-ownership venture portfolios
“My LPs tend to prefer a concentrated portfolio, and so most of my LPs are kind of pushing me in the other direction, which is like, go ahead and take a, take as much ownership as you can in a company, do fewer companies, and if you win with fewer companies, yo…”
Kumar caps K9 Ventures at three to four investments annually
“So if I'm only making three or four new investments in a year, it's an incredibly tight filter to begin with.”
Kumar: Solo founder experience is critical for solo GPs trusting their gut
“And I think that experience of having been a solo founder is critical for me today being a solo GP, because I have to be comfortable in making a judgment call, effectively trusting my gut in a lot of cases.”
Kumar: Founder naivety is advantageous when starting companies
“Being naive when you're starting something is often a good thing. Because otherwise you wouldn't take the same steps that you did.”
Kumar: Pattern matching fails for radically new technology and markets
“And when you have radically new technology or a radically new market, it's very hard to apply pattern matching to that to that.”
Kumar: I pitched Henry Ward on the original concept for eShares
“EShares is one of my portfolio companies. And in fact, it's a company that I co-founded. And in the case of that company I was talking with Henry Ward, who's, who's my co-founder in that company about his previous company that he was working on. And I just rea…”
Kumar: K9 Ventures is operating on a 30-year horizon
“I think when I got into it with a thirty-year timeline.”
Kumar: K9 Ventures shuns sector strategies for radical tech and markets
“I actually don't use a sector strategy. For me, it's really about, like, give me radically new technology and radically new market, and then let's talk about it.”
Kumar: Seed rounds grew from $500K in 2009 to $3M by 2020
“At that time, a seed round was 500,000 dollars. Today, a seed round is two to three million dollars, if not more.”
Kumar: K9 Ventures initial check size is $400K to $600K
“My initial range used to be between 400 to 600 K as an initial investment. I would say I'm probably closer to the higher end of that range today than I was earlier, but I've still tried to keep it very stable and disciplined.”
Kumar: K9 Ventures' first fund was $6.25 million
“So the first fund was about six and six and a quarter million which is super tiny as venture funds go.”
Kumar: I spend most portfolio support time on follow-on financing
“And that's probably what I spend most of my time on with my existing portfolio companies.”
Kumar: K9 invests $400k-$500k initially and up to $4M per startup
“So my sweet spot is usually around 400 to 500,000 as an initial investment. But then I will go as high as about four million dollars into each company. So I do, I'll do 400 to 500,000 into the pre-seed. I might do 750 or a million into the seed, and then anoth…”