Inside the Mind of a Silicon Valley Investor
BY Peter Cohan
Asheem Chandna, partner at Greylock Partners, has a knack for putting money on winners. Here's his story and his process for finding start-ups.
Asheem Chandna, partner at Greylock Partners, is an extremely successful venture capitalist. And if you knew the way he decides which companies get his money, you might change the way you run your start-up.
Who is Chandna? As he told me in an interview earlier this year, he grew up in Mumbai. He moved to Canada before enrolling in Case Western Reserve, where he earned a BS in Electrical Engineering and an MS in Computer Engineering in 1988.
Chandna took his networking expertise to AT&T Bell Labs in 1988 and spent the next 15 years in a variety of large and small companies as a product management executive. In 1991, he joined SynOptics, a Silicon Valley-based networking company. While there, the company grew from $175 million in revenues to $900 million.
Chandna also had a great run at Check Point Software where he “was part of the core management team for 6.5 years” starting in 1996--during which time its annual revenue grew from $10 million to $550 million.
During his time at Check Point, Chandna tried his hand at investing in start-ups. He was so successful at getting into new companies before the big venture capital firms that they were asking “who’s that guy in our deals?”
Eventually, he decided venture investing and helping entrepreneurs build companies was “the right full-time passion for him.” Chandna joined Greylock Partners in 2003, where he has invested in “over a dozen companies.”
Chandna serves on the boards of some rapidly growing companies--including one that went public and another that is rumored to be a 2012 IPO candidate. Imperva went public in November 2011, and the stock is up 13% since then, rising from $24 to $27.91.
Chandna is proud of his investing track record. He says Imperva was ”the top performing IPO in 2011.” He also is on the board of Palo Alto Networks that went public last week and promptly popped 26% from the top of its price range of $42 to $55 by the end of its first day of trading.
Finding a Diamond in the Rough
Some may think you need turn over many rocks to find the rare golden coin. Chandna views it differently. As he explains,”it’s the process that’s just as important as the result.” That’s because he gets email pitches from well over 1,000 start-ups a year. And Chandna is not counting the cold pitches--people in his network refer the more than 1,000 he evaluates.
He is often the first email or call from young engineers looking to capitalize on their expertise through a new venture. He emails these founders in an often futile effort to encourage them to send him their complete “slide deck” rather than just the executive summary “to ensure he isn’t wasting the entrepreneur’s time.”
But the founders are generally reluctant to give him the entire presentation because they believe they can make the sale if they can just get a personal meeting. Chandna is able to whittle down those more than 1,000 emails to the roughly 200 founders with whom he will meet in person.
Despite meeting “dozens of great teams, and companies that most likely will be quite successful,” Chandna knows he only has “enough cycles to invest in less than a handful of companies a year.” He only seeks to “partner with founding teams that he is convinced can build disruptive technology, can be industry thought leaders, and can attract great teams.”
Chandna’s investing experience has taught him that a start-up has better odds of success if:
Its CEO is both frugal and humble while able to get customers to “believe that the start-up represents the next generation and deserves to earn their business;”
There is a good fit between the market needs and the start-up’s product and technology capabilities--they must be better than competitors;
It has a strong missions, excellent founders, and the ability to recruit talent;
Its product road-map is ambitious, yet realistic; and
It can deliver a “minimally viable, awesome product” and “iterate rapidly” in response to customer feedback.
If your start-up does all these things, you have a good chance of getting Chandna’s capital. If not, figure out how it can.
Strategy consultant, start-up investor, teacher, corporate speaker, pundit, and author PETER COHAN has invested in six start-ups, three of which were sold for a total of $2 billion. Before founding Peter S. Cohan & Associates in 1994, he worked with HBS strategy guru Michael Porter.