As part of our Network Investing Program, we invest in the funds of top early-stage investors to identify and back exceptional founders. We launched the program in July 2017, and since then have backed 21 angel fund managers who have a combined portfolio of 850+ companies.
In this Q&A with Sriram Krishnan, one of the investors in the program. He explores what he looks for in pre-seed companies, how to build a successful venture-backed business and why he avoids investing in “acquirable companies.”
How long have you been investing in startups?
I’ve been angel investing for the past six years. This started when I was at Spotify. I consider investing in startups and helping them as an operator in a similar vein — that is, to help startups scale and maximize their true potential. The opportunity to learn from smart founders who are building the future was something I couldn’t resist!
I am fortunate to have been able to strike a balance between being an operator and an investor — even if it means working late and on weekends. I consider myself lucky and if I end up doing the same things I’m doing now in 20 years, I’ll still be happy (and lucky!).
How has your experience as an operator helped you as an investor?
More than anything, it has helped me with the ability to project forward and evaluate if the existing team, plans and operations of the company can scale to meet its mid- or long-term aspirations.
You need a lot of ingredients to build a successful venture-backed business: founders, product-market fit, team structure, TAM, operational best practices, culture, sales and so on.
Working at fast-growth companies like Spotify and Tinder has helped me understand the strategic and tactical elements of building consumer and B2B SaaS businesses. This has made me a better judge of what makes a successful company tick and whether the startups I meet are in a position to replicate or exceed expectations.
What do you typically look for when you make a new investment?
In early stage investing, there aren’t many signals to look for, so I look for a combination of the following:
There is no right or wrong answer. I consider all of these factors before making a bet.
What is one startup you’re excited about right now?
One company, in particular, I’m excited about is Akash Systems. Akash Founder Felix Ejeckam’s sold his first company to De Beers, and now at Akash he’s building satellites and constellations that will deliver cheap broadband data to every person on earth. I’ve known Felix for a long time and think he’s top-notch. I was first-money-in in his pre-seed round and brought along a couple of other funds to invest. When the company was ready to raise a larger seed round, I introduced them to Khosla Ventures. We’ve both doubled down since.
What sectors and business models do you find the most interesting?
I like to invest in companies that I envision becoming sustainable, scalable businesses.
Having worked at Spotify and Tinder, I am attracted to consumer-facing opportunities that are not only cutting-edge but also have a clear vision in generating revenue. One of my most recent investments is Superplastic.co — a character-based product and entertainment brand. The revenue play here is obvious with licensing and merchandising.
I also see a lot of B2B SaaS opportunities. It’s easier to predict revenue opportunities or growth for B2B startups. One of latest B2B SaaS investments is UserLeap, a solution that automates understanding customer experience at scale.
What are the value-adds you bring as an investor i.e. why are founders interested in taking your money?
An operator myself, I not only empathize with the struggles facing founders, but also provide strategic, tactical, and actionable advice. Having operated within many different landscapes and markets at Spotify and Tinder, I also bring regional- and market-specific insight to companies.
I aim to go above and beyond by playing a considerable role in:
I’m accessible at all times during the day and have had chats with founders at 11 p.m. and 2 a.m. before. I’m happy to do so again!
What lessons have you learned as an angel investor?
Numerous! The first is to have patience. Over the years, I quickly realized that whenever one train leaves the station, another ones is around the corner. Opportunity will always knock on the door. The second is that it takes the same amount of effort to build a million dollar company and a billion dollar company. And finally, is to not invest in companies that I think are acquirable (e.g. “Ah worst case the team or company will rarely get acquired”). M&As are hard and rarely happen.
MagicSchool founder Adeel Khan is a former teacher and principal whose AI platform is saving teachers time, fighting burnout, and helping schools build responsible AI experiences for students.
John Nay, a founder at the intersection of AI and law, built Norm Ai as a solution to aid compliance officers in highly regulated industries.
This year's selection honors 50 new early-stage startups building industry-specific software across a variety of verticals.