20VC What Makes The Best Venture Firms Today So Special, The 3 Structural Impediments That Face Venture Today and Why The Debate on AR vs VR is BS with Anjney Midha, Founder & CEO @ Ubiquity6

Summary Notes


In this episode of "20 Minutes VC," host Harry Stebbings interviews Anjani Midha, the founder and CEO of Ubiquity Six, a startup that's raised over $38 million for its platform enabling shared AR and VR experiences. Midha shares insights from his unique journey from venture capitalist at Kleiner Perkins to entrepreneur, emphasizing the importance of understanding risk, constructing a business that can thrive without constant capital infusions, and the value of early team members. He critiques the venture capital industry for its lack of focus, the misalignment of liquidity timelines, and the potential negative impact of successful investors' decision-making on firm dynamics. Midha also dismisses the AR versus VR debate as a distraction from the real revolution in real-time networked 3D worlds. The conversation also touches on the qualities that make firms like First Round, Index, and Benchmark stand out, including their founder-focused service approach and stable partnerships.

Summary Notes

Introduction to 20VC Podcast with Harry Stebbings and Anjani Midha

  • Harry Stebbings introduces the podcast and his Instagram handle.
  • Mentions the unique perspective of VCs turned founders.
  • Anjani Midha is the guest, founder and CEO of Ubiquity Six, which offers shared AR and VR experiences.
  • Anjani's company has raised over $38 million from notable investors.
  • Anjani previously worked as an investor at Kleiner Perkins and co-founded KPCB Edge.
  • Harry thanks previous guests for question suggestions.
  • Harry promotes Brex, Terminal, and Cooley before handing over to Anjani.

We are back on the 20 minutes VC with me, Harry Stebbings at H Stepbings 1996 with two b's on Instagram.

Harry Stebbings introduces the podcast episode and his Instagram handle.

To date, Angeny's raised over $38 million in funding for ubiquity, safe from some of the very best in the business, including Finn at first round, Mike Volpe at index and Mitch at benchmark.

This quote highlights the significant funding Anjani's company has received and the reputable investors involved.

Anjani Midha's Background

  • Anjani had a unique childhood, living away from home since age 10.
  • Attended boarding school in rural India without computers or internet.
  • Moved to Singapore for high school and then to the US for college at Stanford.
  • The experience of using a VR headset at Stanford was pivotal for Anjani.
  • Realized the potential of VR and AR for immersive communication with distant family and friends.
  • Founded Ubiquity Six to create shared mixed reality experiences.

I've basically lived away from home since I was ten years old, a few hundred thousand miles away from family.

Anjani describes the distance from family during childhood, which later influenced his career.

Being able to be physically embodied with the people you care about on the other side of the planet was the light moment for me, I think.

Anjani explains the realization that VR and AR could revolutionize long-distance communication.

Transition from Venture Capital to Founding Ubiquity Six

  • Anjani found it easy to leave venture capital to pursue a passion for enabling shared AR experiences.
  • Led a seed fund focused on AR, VR, and computer vision at Kleiner called KPCB Edge.
  • Realized the importance of solving the problem of real-time interaction in AR and VR.
  • The decision to leave venture capital was driven by the desire to solve this problem, not by a risk-reward calculation.

It was not a tough decision to leave venture. And to be fair, it probably was a risky thing to do.

Anjani acknowledges the risk involved in leaving a stable venture capital job but did not find the decision difficult.

There's a really valuable problem here to solve. Let's go figure it out.

Anjani's motivation to leave venture capital was to solve the challenge of creating shared AR experiences.

Personal Approach to Risk

  • Anjani's approach to risk was not a major factor in the decision to leave venture capital.
  • The problem of enabling shared AR experiences was compelling enough to pursue, regardless of risk.
  • Realization of the risk involved came after the decision was made.

But at the time, the risk reward calculation really wasn't even part of the decision making.

Anjani did not consider risk reward calculation as a primary factor when deciding to leave venture capital for entrepreneurship.

Structure of the Interview

  • The interview is split into two parts: venture fundraising and macro topics like AR, VR, and industry incumbents.
  • Anjani agrees to this structure for the interview.

I do want to break the interview today up into two core components, really.

Harry outlines the structure of the interview, focusing on venture fundraising and broader industry topics.

Venture Capital Firms and Dysfunction

  • Anjani believes that many venture capital firms are dysfunctional.
  • Reflects that many VCs ignore historical patterns in their pursuit of new and exciting ventures.
  • Suggests that ignoring history can lead to repeating past mistakes.

90% of venture capital firms are dysfunctional, something that I might agree with having spoken to 2000.

Anjani expresses a critical view of the venture capital industry, suggesting widespread dysfunction.

I find the bulk of vcs very conveniently ignore history all the time, because their job depends many times on framing excitement about things that are new.

Anjani criticizes VCs for often ignoring historical precedents in favor of promoting new ventures.## Venture Capital Dynamics

  • Venture capital is a service business that finances creative hits, akin to historical mediums like books and TV.
  • The industry has evolved from early financiers taking risks on creatives to a market with new entrants and different risk models.
  • The current state of venture capital features a saturation of both financiers and entrepreneurs.
  • New players with alternative business models, like AWS, Stripe, and Softbank, are emerging as dominant forces.

"Venture capital squarely in the kind of services business that we've seen in past parts of human history, where you have a new medium, akin to software, with talented creatives trying something new out and trying to build something which has very, very outsized impact."

The quote highlights the parallel between venture capital and historical creative industries, emphasizing its role in funding innovative projects with the potential for significant impact.

"Netflix is now the largest financier of entertainment of film and tv, and has none of the trappings of traditional studio execs, because their business model is a subscription business."

This quote illustrates how new business models like Netflix's subscription service can disrupt traditional industries and become leading financiers by taking a different approach to risk and investment.

"I think we're at a moment in time where we've gone from those early golden days of a few early venture capitalists picking the right creatives, to then an oversaturation of the market, both on the financier and the entrepreneur side."

Anjani Midha emphasizes the shift from a market with a few key venture capitalists to one where there is an oversupply of both investors and entrepreneurs, leading to a change in the dynamics of the industry.

Structural Challenges in Venture Capital

  • Venture capital firms are struggling with a lack of focus, similar to the "squishy middle" in the restaurant industry.
  • The time to liquidity for startups has increased, causing a disconnect between investor track records and actual returns.
  • There's a power dynamic issue within venture firms due to delayed liquidity, affecting the assessment of investor performance.
  • The success of venture capital firms can lead to decision-making biases, suggesting a need for successful investors to retire at a certain point.

"As the number of vcs has exploded over the last decade... This squishy middle of firms has emerged with a lack of focus on who they're serving, what focus they're serving, what kind of services they're providing, what their differentiated strategy is."

Anjani Midha compares the venture capital industry to the restaurant business, pointing out that firms without a clear focus are struggling, similar to mid-tier restaurants during economic downturns.

"The time to liquidity has gone up from first check to whatever that liquidity event might be... And that's just changed completely."

The quote addresses the issue of increased timeframes for startups to reach liquidity events, which complicates the ability of venture capitalists to establish a proven track record within a reasonable period.

"The last one is basically probably the most controversial, which is, as you know, venture capital is a business about outliers... And when decision making starts getting worse after successes, because you're over indexing on a few successes and not actually assessing the true risk of new investments, I think bad things happen."

Here, Anjani Midha suggests that the venture capital industry's focus on outlier successes can skew decision-making and that there should be a system in place to manage the influence of top performers to maintain quality decision-making.## Ruthless Focus and High Net Promoter Score with Founders

  • Ruthless focus is a common trait among top venture firms like Benchmark, Index, and First Round.
  • These firms have a high net promoter score with founders due to their service-oriented approach.
  • They evaluate themselves on service metrics rather than time to liquidity.
  • The turnaround time for assistance from these firms is comparable to that of a service provider.
  • They operate as if they are being evaluated as a service firm, not merely as financiers.

"They have an insanely high net promoter score with founders, because they have figured out a way to evaluate themselves, not on time, to liquidity."

This quote emphasizes the importance of venture capital firms measuring their success by the quality of service they provide to founders, not just by financial metrics.

Successful Generational Transitions

  • Successful transition plans within venture firms are crucial for stability.
  • Startups are designed to transform risk into security, so venture capital firms should add stability, not risk.
  • Stability in venture firms reassures employees and co-founders that the firm is a reliable partner.

"And I think the last thing that they've all actually figured out, which is really hard to do, is really solid transition plans and successful transition plans, generational transitions inside their firms."

Anjani Midha highlights the importance of smooth generational transitions within venture capital firms to ensure ongoing stability and support for startups.

VC as Co-Founders and Network Access

  • Viewing venture capitalists as co-founders can help leverage their strengths and networks.
  • Venture capitalists bring extensive networks and industry relationships that can be critical for young startups.
  • The stability of a venture capital firm enhances the trust and reliability of these networks.

"If Harry was my co founder, then what can he bring to our company that me and my co founder don't have?"

Anjani Midha describes the perspective of treating venture capitalists as co-founders, focusing on the unique resources and networks they can contribute to a startup.

Building Relationships and Trust

  • Building relationships with investors is a key part of the fundraising process.
  • Trust in relationships is essential and is strengthened by the stability of the venture firm.
  • A stable partnership within a venture firm allows for shared networks and support among partners.

"And I think that kind of trust of relationships is hard to build in an unstable environment."

The quote stresses the importance of stability in venture capital firms for building and maintaining trustful relationships with founders.

Understanding and Managing Risk

  • Founders should demonstrate to investors that they are capable of managing risks effectively.
  • Investors are interested in how founders handle various types of risks, not in avoiding risks altogether.
  • Convincing star team members to join a startup can be a more significant investment than attracting investors.
  • Founders should be able to present a plan that shows high upside potential while also protecting the downside.

"I think investors just want to know that you, as an entrepreneur, as a founder, are a really good manager of risk, and you know when to take the right risks."

Anjani Midha explains that investors are looking for founders who can intelligently manage risk, which is a critical aspect of the investor-founder relationship.## Communicating with Investors

  • Early team members from prestigious companies require a solid operating plan to get comfortable with risks.
  • Investors are more forgiving than early team members when it comes to risk.
  • Effective communication with investors is crucial.

And then you just go communicate that to an investor. And I find that investors are much more forgiving than those early team members.

The quote emphasizes the importance of communicating a well-thought-out operating plan to investors, highlighting that investors may be more lenient regarding the risks involved.

AR and VR Debates in Venture Capital

  • Debates on AR and VR are considered a waste of time by VCs.
  • Investors often get caught up in format wars rather than focusing on the underlying experience consumers desire.
  • Real-time networked 3D worlds are seen as the future, not the specific technologies of AR or VR.

You're looking in the wrong place, because the company or the service that ends up figuring out how to deliver the same experience to people, no matter what device they're on, what platform they're on, in a way that makes most sense to them, ultimately always ends up winning, right?

This quote suggests that the success of a company lies not in the technology format it chooses (like AR or VR), but in its ability to deliver a seamless experience across various devices and platforms.

The Importance of the Underlying Experience

  • AR and VR are merely different viewing mechanisms for the same types of experiences.
  • The real revolution is happening with real-time 3D rendering and multiplayer real-time 3D worlds.
  • Companies that leverage the uniqueness of different platforms to offer varied viewing experiences will succeed.

My point is, VCs love getting preoccupied with the format and end up missing the true debate or the one that actually matters, which is what is the underlying experience that everyday consumers are really craving.

The quote criticizes the focus on the format (AR vs. VR) and stresses the importance of understanding and delivering the underlying experience that consumers are looking for.

Quick Fire Round: Personal Insights

  • Anjani's favorite book is "Rainbow's End," which inspired the foundation of Ubiquity6.
  • The biggest learning from venture experience is that the founder is always right.
  • The most valuable thing a VC can bring to the table, aside from cash, is hiring assistance.
  • Anjani's advice to founders is to build a business plan that is not dependent on raising capital.
  • Finn Barnes is Anjani's closest mentor, teaching the importance of focusing on people within the company.
  • The happiness of the team is a primary concern that keeps Anjani up at night.
  • Seed investors were able to dream along with the company, while later-stage investors benefit from more filled-in blanks.

The founder is always right.

This quote reflects Anjani's belief in the founder's vision and decisions as a critical factor in a startup's success.

Just start and end with the people. Nothing matters more than the people at your company.

Anjani underscores the significance of the team and the people involved in a company, as learned from his mentor Finn Barnes.

Relationship with Investors

  • Seed investors are more involved in the early vision and dreams of the company.
  • Later-stage investors have the advantage of seeing more progress and filled-in gaps.
  • Early seed investors can provide insight into the company's unique strengths.

Our seed investors were able to dream the dream with us at the 5, 10, and 50 year mark, and our later stage investors are able to do the same.

This quote highlights the different roles and perspectives that seed versus later-stage investors have regarding a company's future.

Personal Beliefs and Predictions

  • Anjani believes that in five years, most people will spend the majority of their time offline.
  • This belief is contrary to the common perception of increasing online presence.

I believe that most people five years from now will spend the bulk of their time offline, not online.

Anjani expresses a contrarian view that suggests a shift away from online activities in the future, which he believes is significant enough to warrant further discussion in another podcast episode.

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