Nitin Pachisia, Founding Partner at Unshackled Ventures explains how does immigrant-focused investing work, how does Unshackled Ventures source its deals and how should immigrant (and local) founders start building their network during COVID-19. We also discuss the best ways to identify if the investor is a good fit for your specific company.
Nitin's LinkedIn: https://www.linkedin.com/in/npachisia/
Unshackled Ventures: https://www.unshackledvc.com/
Office hours with Make it Studio: https://make-studios.typeform.com/to/bUvZoSwl - it's time to get some extra questions answered.
In this episode of Fundraising Radio we will discuss investing in immigrant founders and some tools that can be used to make sure that the investor will be a good fit for your specific company with Nitin Pachisia, Founding Partner at Unshackled Ventures.
First of all Nitin gives some background on himself and on Unshackled Ventures which he started about six years ago. While discussing his background Nitin mentions that he is an entrepreneur and grew up in an entrepreneurial family. Nitin learned the basics of business from his dad and then immigrated over to the US in 2005 as a 25 y.o. and was very fortunate coming to Silicon Valley.
He used to be part of Deloitte at that time, where he spent five years and then started to work with startups. After some time Nitin decided to start his own first startup, which is how he discovered that the immigrant journey aspect has not truly been tackled by VC.
Unshackled Ventures is taking care of very early aspects of being an immigrant and building a company, which covers things like immigration access to people, for progressing business. UV invests in ideas, often Pre-product and Pre-revenue. They use their immigration PlayBook as well as their portfolio success PlayBook to save founders’ time and help them build that company faster.
Speaking about Unshackled Ventures, what do you generally invest in in terms of the fields of your focus?
Pretty much everything that can scale.
«When you think of venture capital, and where it is best utilized, it is a high risk, high reward type of investing. And so you only want to invest in things that can scale and add an exponentially faster pace».
Therefore, we would do hardware, software, space-tech, life-sciences, material-sciences. And if you think of kind of the common core, and that is, there's some kind of mode.
And in terms of stage, where do you usually come in?
So, about two thirds of investments are Pre-product and Pre-revenue and about half the times UV incorporates the company with the founders.
«We have never told anyone that it is too early for us, but we do sometimes pass because it is already too late for us».
The sweet spot is when founders have done their customer discovery work. They have built kind of the initial insights on what they are going to build, or what they are going to test in terms of hypotheses. And it is kind of that initial half a million to a million dollars that they are raising to, to prove out those hypotheses, build an initial version of the product primarily to test the hypothesis and not so much to scale or sell.
Unshackled Ventures will work alongside the founders from that early point to refine a lot of their thought process, learn a lot from customers, release the initial versions of the product, test that refining to a point where there is a clear line of sight and understanding of who is the customer, what segment are they going to sell to and so on.
In other words it is a lot of answering the questions at the Pre-seed stage vs. really trying to build the full fledged product or distribution.
«Our checks are typically between 100000$ and 400000$, and we are kind of a «lead investor». We do not need anybody else to be in with or before us to invest».
Let’s talk about deal sourcing now. How do you find those founders that you invest in?
Generally it is a lot of relationships and focusing on getting to know people who entrepreneurs would reach out to. A lot of deal flow is direct. You can just go to Unshackled Ventures’ website. There is a form, which is about the founders and the idea they are working on.
«We made it completely open with a cold pitch coming through this form and a warm intro coming through people we have got invested with.
But a lot of our founders also get to know us through angel investors and other entrepreneurs. Now we have met more than three thousand companies».
- Before the COVID-19 a lot of people were sourcing their deals directly. Has anything changed for you?
The only thing that has changed is that the fun part of the job is missing a little bit.
A lot of the fun part of traveling and meeting new people is gone but it does not affect the day to day execution work.
Because a lot of the execution work like keeping in touch with people still happens through zoom quite a bit, so that investors have become more active since COVID hit. That's because there is a clear upshift in entrepreneurial activity: more people are starting more companies.
«And so we've been more active this year than we've ever been».
That trend is likely to continue for the rest of the year. It was easier for UV to adjust to the corporate environment, because they used to do a lot of investing through video calls anyway, because some founders are in the Midwest, on the East Coast… now it is just a hundred percent of the investments done like that.
- You are heavily focused on immigrant founders, so what do you think are the major mistakes that those people are making?
1. Being humble.
Nitin would not characterize it as a mistake, but as s kind of the observation he has made that most immigrants are more humble. If you grew up in the US it somehow makes you able to talk about yourself and how great you are. It does not mean suggesting that everybody starts boasting of themselves. But, as an entrepreneur, you have to get comfortable talking about the uniqueness of what you know and of your idea.
«It just takes a little more time for immigrants to open up and get comfortable, but once they do, it is like magic, the journey transforms when people can talk about their skills, insights, all the great things they have done in their life».
The second thing is that there is so much misinformation specifically as it comes to immigration.
When Nitin was starting his first company, he spoke with about five dozen immigration attorneys, and all but one said that he could not start a company which Nitin knew was wrong. So he had to spend a lot of time doing that research himself until he found an attorney who really helped (you have to find an attorney who specialises in immigration in order to get the right advice).
«You can save a lot of time once identifying the right people to work with whether it is about immigration, about raising money, building a company, learning the ropes of company building vs. just tech building or product building and so on».
A lot of immigrants, for example, have come to the USA through the university system, and when they go to some international career centers a lot of advice there is not really helpful.
So you have to first find the right partners or right people who you can trust and/or ask questions and fortunately it has become much easier to do it.
«So, if any immigrant founders are listening to this, and if you have questions, just reach out to us and ask us, we have done these talks so many times and it is fascinating when we share our knowledge».
- Question is, how to find the right partners? What is your advice on that? How should immigrants expand their network if they have just arrived?
«Entrepreneurship does not really start when you decide to start your first company, it starts well before that. So you should always be networking, always trying to surround yourself with the smartest people you can find and it is not just about technical knowledge. Smartness could be about how you influence people».
Do not wait for the moment when you are ready to start your company to start hustling, start that hustle now.
The second important issue is to learn from people who have gone through the journey themselves and ideally are going through it NOW so that they are just a couple of years or a couple time periods of time ahead of you.
Because if someone went through this journey twenty years ago their experience is really not relevant to today's environment. But someone who went through two years ago could give you some important advice when you get to learn from their experience. And they will also introduce you to people, who are therefore more likely to be in a position to help you as a lawyer, as an investor, as a Co-founder, employee and whatever that might be.
So being able to choose and find the right people is a key skill that you have to acquire. It is also really important that you do not stop until you get the right answer. If you keep getting the negative answer it means that you just have not met the right person yet.
Let’s move on back to the fundraising and let's talk specifically on finding the investors. When you want to talk to someone, how do you make sure that he or she is a good fit? Are there any specific tools?
Could you recommend something other than just looking through your common connections on LinkedIn or trying to talk to common friends?
The best source is people who have interacted with the investor. If you can find someone within their portfolio, that is ideal because it is going to inform you on how they service their portfolio. People who have invested with those investors would be good sources, entrepreneurs who met the investors but did not raise from them - either.
And then in general you have to look at the portfolio page in terms of what they invest in, how they invest and how often they lead.
As things get serious, start trying to get their portfolio founders to ask about their experience. And in most cases founders are happy to talk about VCs they have good relationships with.
And if founders are reluctant to talk about someone, that is a data point by itself.
What other recommendations could you give in terms of preparing for the company to be launched for those who are thinking of opening the company and are not sure if they are actually ready for this?
People are starting companies increasingly thinking of the VC as the right source of capital for them and both could be right answers in the right situation but they could be the wrong as well.
«If you are starting a company for fame or just chasing wealth, there are better ways to get there and chances are you are not going to last. Building a startup takes so many ups and downs so if you are not doing it for the right reasons and you are not super passionate about solving the problem, you are just not going to be able to last».
So the first thing is to validate why you are doing it and are you passionate enough. And if you are willing to sacrifice anything besides your family that is a good reason to start.
And then you figure out whether VC is the right source of financing for you because not every company is going to hit escape velocity, not every business is going to go from two million to hundred million in revenue run rate in five years.
And if you know that your business is not capable of that kind of velocity and that kind of scale then VC is likely not the right source of capital for you. There is a lot of other sources of capital, which are much less expensive and much less permanent and then you go into those routes.
Depending on where your passion comes from and how you plan to build a company, what is the potential for scale if you put the pieces together.
And once you know all that, that is when you should do customer discovery before taking the lead.
So, there are a lot of things that you can do upfront to position yourself in a way that when you take that leap the odds of you getting to the other side are higher versus just deciding that you are bored at your job so that you are going to leave it and start looking for something else.
- What’s the minimum survival pay?
It depends on each one individual, and it depends on where you are in your stage of life. Nitin gives an example of some recent graduate students, for whom it is just enough to be in a shared apartment, or people making 25000$ - 30000$ dollars a year so they can have a family. So even if the kids are going to public school, you still have the healthcare.
But generally speaking founders usually do not pay themselves more than 75000$ - 90000$ before Series A.
- We are moving onto the last question of today's episode, which is a call to action. What is the one thing you want out listeners to do as soon as the episode is over?
We all face a lot of problems and most of us complain about problems, but some of us look at those and say that there is a way to solve this problem. And a small percentage of people say that we should try to find a way to actually see if this can be implemented and then a very small percentage of them becomes so passionate about that, that they go on and start a business to solve that problem.
«If you are in that very small percentage, get passionate about it and get going and then if you believe that you're building a company that can scale adventure pace, please reach out to us. That's my call to action».
The article is written by Elizaveta Belinskaya for Fundraising Radio Premium.