Please tell us about yourself
Neeraj Agrawal is a general partner at Battery Ventures, arguably the most active venture capital firm in marketing technology. I became aware of just how big of a footprint they have in this space when reviewing the data provided by VentureBeat that revealed $21.8 billion of funding invested in marketing technology to date.
According to the deal data tracked by VentureBeat, Battery Ventures had been involved in 39 marketing technology funding events, more than any other firm. And Neeraj was directly attached with a large number of those deals. When I publicly expressed an interest in talking with him, Erik Bratt, VP of content at Tealium, in which Battery has invested, kindly made the introduction.
Neeraj was kind enough to take some time to share his perspective of nearly 15 years of investing in some of the most innovative companies in marketing tech.
Can you tell us a little about your background? How did you get into an offbeat and unconventional career such as venture capital?
My path to VC was totally accidental. I studied computer science at Cornell, and then came to Boston for my MBA. During my b-school summer, I worked in product management at Real Networks. After a fun summer, someone at Battery asked me to help him map out the “streaming media” space. Basically, Battery was looking for free labor. Video was just starting to happen on the Internet, and I thought this was the perfect way for me to identify a hot start-up to join in the streaming sector.
The project went well, but I didn’t find a start-up that resonated with me. Instead, Battery offered me a full-time position as a senior associate in March 2000. I thought I would spend a year or two at Battery until I found that magical start-up to join. But I really enjoyed the investment side. And it’s crazy to think I’ve now been here for almost 15 years!
Nasdaq: What’s a day in your life as a VC like?
NA: I spend about half my time meeting companies that could be new investment opportunities. I meet on average 100-200 companies a year, though I only make one to two new investments. I spend the other half of my time working with my existing portfolio companies–attending board meetings, plus helping with recruiting, financings and other strategic matters. These days I also spend some time writing blog posts and discovering and sharing new content on Twitter. Overall, it is hard for me to call this profession work. Many founders come into Battery and share everything they have learned about a specific product market in a short, 90-minute meeting. We get to be sponges, asking lots of questions, and then we get to do it again and again. It’s really intellectually exciting to figure out which of these investments to make and then how to help the founders achieve their goals.
Nasdaq: How many companies have you invested in and what is your overall investment?
NA: I have invested in 25-30 companies over my time at Battery. Our typical investment is in the $15-20 million range, so I estimate I’ve invested between $400-$500 million over the years. This is across multiple funds, though, so it’s not a number I actively think about.
What stage do you focus on and how much capital do you look to deploy for each portfolio addition?
NA: I am pretty balanced across all stages. In general, I target about a third of my dollars into seed/series A investments, a third into mid-stage (series B or C) and the remaining into later stage deals or pre-IPO rounds. The typical investment for me is in the $15-$20 million range over the life of the investment, but several of my investments are in the $40 million range.
What matters to you most when evaluating a company as a potential fit for your firm, and how does that relate to the ambitious companies that you have worked with in the past?
NA: At a high level, we evaluate four key ingredients to any new investment: team, market, technology and the deal itself (valuation, size of round, etc.) Team and market are the most important variables. Some VCs argue team is the most important factor, while others claim market is everything. I’ve come to appreciate both of them as being equally important to a successful outcome. I do think a lot about the open-endedness of a market opportunity, assuming things go well. I have found that is when the real ‘upside’ happens.
What advice do you offer to a first time founder?
NA: I believe the journey of a founder is a fun and rewarding one, but full of potholes along the way. Many of our founders work at it for 10 or more years before they achieve a liquidity event. We talk about some of these potholes in our original article about building SaaS companies, a process we dubbed the “SaaS Adventure.” Ultimately, I believe the journey requires incredible perseverance. Running a company also, eventually, turns into an HR-dominated position: You’re focused on hiring, retaining and motivating a team, and these activities will ultimately determine whether you have a good or a great outcome. Specific advice would be, don’t be afraid to hire folks smarter than you. Don’t be afraid to hire seasoned executives early in the journey – yes, they are expensive, but great people attract other great people. And ultimately it takes a village to build a large and successful company.
What is the one common denominator that stands out to you across all investments your firm has made during its history?
NA: It comes down to picking great markets and great teams to execute against specific opportunities. If the market never proves to be a large and interesting one, it’s very hard for even the best teams to execute well. However, even if the market opportunity is strong, it requires an incredible team to compete and come out first or second in the market – third- or fourth-place finishers don’t generate outsized returns. Timing the market is the other ‘secret’ ingredient. If you are too early for your opportunity, you run out of money before the demand or market inflection point happens; if you’re too late, others might already have captured leadership positions and built insurmountable moats to thwart competitors. And of course, I would be remiss by not saying that luck matters a lot.