20VC Why Young VCs Must Have Cheque Writing Ability & Why Corporate VC Is The Best Training Ground For New VCs with Nagraj Kashyap @ Microsoft Ventures

In this episode of "20 Minutes VC," host Harry Debbings interviews Nagaraj Kashyap, the head of Microsoft Ventures, about the evolution and future of corporate venture capital (CVC). Kashyap shares insights from his journey, starting as a software engineer, transitioning through management consulting to venture capital, and his experience in building Qualcomm Ventures and Microsoft Ventures. He emphasizes the unique ability of CVCs to train new investors due to their flexible investment models, and their importance in driving innovation and strategy within parent companies. Kashyap also discusses the significance of diversity in VC and the potential growth of CVCs from 25% to 35% of the VC market. He highlights the role of mentorship in VC success and the importance of making strategic investments that align with corporate goals and societal benefits, exemplified by his recent investment in Kahoot, an educational technology company.

• Harry Debbings introduces the episode of "20 minutes VC."
• Harry mentions his social media handle and encourages ad support.
• The guest for the episode is Nagaraj Kashyap, head of Microsoft Ventures.
• Nagaraj's background includes working at Qualcomm Ventures before joining Microsoft.
• Thanks are given to Matthew Goldstein for the introduction to Nagaraj.

Welcome back to another episode in the land of the 20 minutes VC with me, your host Harry Debbings, found on Snapchat at h stepbings with two B's and all ads. Get a personal thank you from me, however, to the show today. And we have a slightly different style of guest today as we have a leader from the world of corporate venture capital joining us in the hot seat today. And so I'm delighted to welcome Nagrash Cash app to the show today.

The quote sets the stage for the episode, highlighting the introduction of a distinguished guest from the corporate venture capital world.

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• Greenhouse's applicant tracking system helps companies hire qualified candidates.

Foundersuite makes the leading CRM for raising startup capital. Since March of 2016, Foundersuite customers have raised over $130,000,000 in seed and venture capital.

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• Nagaraj Kashyap is the head of Microsoft Ventures.
• Prior to Microsoft, he was at Qualcomm Ventures and grew it into a global corporate venture capital leader.
• Nagaraj started as a software engineer, became a management consultant, and then moved into venture capital.
• The transition to venture capital was appealing because it involved interesting work without the need for travel.

I started off as a software engineer and worked my way into being a management consultant, after which I was lucky enough to land into Qualcomm Ventures, which is the corporate venture capital of Qualcomm.

Nagaraj describes his professional journey and how he entered the venture capital industry.

• Nagaraj was excited to start Microsoft Ventures as it was like creating his own startup.
• He focused on building a team and culture for the first six months.
• Nagaraj emphasizes the importance of recruiting the right people to fit the culture he envisioned for Microsoft Ventures.
• He reflects on lessons learned from his previous experience twelve years ago.

So it was really very exciting when I got that. I did this once over twelve years back and you rarely get a chance to do very similar thing again because you have a lot of lessons learned.

Nagaraj expresses enthusiasm for the opportunity to apply past experiences to his new role at Microsoft Ventures.

• Nagaraj learned that smart professionals can be trained in venture capital even without prior experience.
• He has a specific methodology for training new VC professionals.
• The approach of training and nurturing talent was a key lesson from his past experience.

I think some of the good lessons I took, which I'm doing it again basically is what I learned was you can absolutely take young professionals who are smart, who are just pure smart, who have never done VC, and you can train them.

This quote highlights Nagaraj's belief in the potential of smart individuals to be trained in venture capital, a practice he continues at Microsoft Ventures.## Qualcomm and Corporate Venture Capital Experience

• Nagaraj Kashyap reflects on his 12-year experience building Qualcomm Ventures.
• He emphasizes the importance of hiring the right people and giving them early responsibilities.
• Nagaraj believes in empowering new hires to make decisions and learn from their experiences.
• He mentions the compressed timeframe in building a venture capital firm using lessons from Qualcomm.
• He has built a venture capital firm in less than twelve months that is recognized as active and reputable.

It took twelve years to build Qualcomm ventures the way it is. I'm compressing that time frame because I'm taking a lot of the lessons.

And that's what I've done, I think in less than twelve months built, I think, a Cobra venture capital firm that is already recognized as one of the most active and a good firm to work well.

Nagaraj Kashyap talks about using his experience from Qualcomm to quickly establish a successful venture capital firm, highlighting the importance of applying past lessons to new ventures.

• Nagaraj Kashyap discusses his strict methodology in training new venture capitalists.
• The methodology involves hiring smart people, giving them early responsibility, and letting them write small checks.
• He believes in allowing new VCs to make mistakes and learn from them.
• The approach is about empowering individuals to take ownership of their investments and decisions.
• Nagaraj sees corporate VC as an excellent training ground due to the flexibility it offers compared to traditional financial VC.

For me, when I say strict methodology, I mean things that have worked and it is really about ownership.

The best people are self aware, they realize they made a mistake and at the time when they have to write the bigger checks, they're much better positioned to make the right decisions.

Nagaraj Kashyap explains that his training methodology focuses on ownership and empowerment, allowing new VCs to learn from both successes and mistakes.

• Nagaraj Kashyap clarifies that corporate venture capital allows more flexibility than financial venture capital.
• Corporate VCs can write various sizes of checks and invest in different sectors without strict constraints.
• He contrasts this with financial VCs that have a set formula based on LP agreements, which limits the ability to make smaller, experimental investments.
• Corporate VCs can invest on behalf of large corporations with varied interests, which is not always possible in traditional VC.

The reason is there is a lot of flexibility in the kinds of checks corporate VCs can write, the kind of stages we can invest in, kind of sectors we can invest in.

So I would say the degree of flexibility in how the fund is structured allows us to train the next generation of VCs.

Nagaraj Kashyap explains the flexibility of corporate VCs in terms of investment size, stages, and sectors, which provides a unique advantage in training new venture capitalists.

• Nagaraj Kashyap highlights the critical role of mentorship in training new VCs.
• He believes that while mentorship is essential, it must be coupled with giving new VCs the opportunity to make their own decisions.
• He emphasizes that venture capital is an art that requires practical experience and cannot be learned solely from books or mentoring.
• The combination of mentorship and hands-on investment experience is crucial for a successful career in VC.

I think mentoring is critical, but I think, as I said, mentoring alone is not enough because at some point the young VC, or the VC who's coming into the profession has to spread out on their own and mentoring alone won't do it.

Nagaraj Kashyap stresses the importance of mentorship in venture capital but also the necessity for new VCs to independently make decisions and learn from their investments.

• Nagaraj Kashyap addresses the misconceptions about corporate venture capital.
• He provides a statistic that 25% of all VC dollars come from corporate sources, underscoring the significance of corporate VC in the industry.
• He acknowledges the negative perceptions that exist towards corporate VCs but suggests that these are based on past experiences from the late 90s.
• Nagaraj believes that corporate venture capital is a permanent and vital part of the VC ecosystem.

Right now, 25% of all VC dollars come from corporate. So from an asset class perspective, it is here to stay.

There's some misconceptions, or so I would say perceptions that were built over time.

Nagaraj Kashyap asserts the importance of corporate venture capital in the overall VC landscape and aims to clarify the negative perceptions that have been formed over time.## Evolution of Corporate Venture Capital (VC)

• Corporate VCs were initially seen as short-term capital sources during the stock market crash.
• Misconceptions of corporate VCs being undisciplined and not committed for the long term still persist from that era.
• The role of corporate VCs has evolved to support parent corporations in finding innovation.
• Corporate VCs now focus on ensuring startups work well with big corporations and infuse startup culture into large corporations.
• Strong balance sheets of corporations indicate a shift from the past perceptions of corporate VCs.
• New corporate VCs are changing perceptions by investing with best practices that address concerns of financial VCs and entrepreneurs.
• Corporate VC is a critical part of the VC ecosystem and is here to stay.
• Best practices from established corporate VCs like Qualcomm, Google, and Intel are influencing the new generation of corporate VCs.

"That led to many of the misperceptions today that still persist can be traced back to the era when corporate vcs were viewed as short term capital sources, not disciplined, not willing to stay with the company for the long run."

This quote highlights the historical view of corporate VCs as unreliable and short-term focused, which has contributed to ongoing misconceptions.

• The future of corporate VC looks promising, with expectations of growth in their sector.
• A report commissioned by Telstra predicts an increase in corporate VC from 25% to 35% over the next five to ten years.
• Large corporations will continue to seek new sources of innovation, ensuring their participation in the startup ecosystem.
• Corporate VC participation is expected to either remain steady or grow but not shrink.

"I don't have a crystal ball, but there was a recent report, actually just very topical release commissioned by Telstra that came out just a couple of days back which said that they see corporate vc going from 25% to 35% think over the next five to ten years."

The quote refers to a report forecasting growth in the corporate VC sector, indicating a positive outlook for the future involvement of corporations in venture capital.

• In the context of Microsoft Ventures, Microsoft is the single Limited Partner (LP).
• The reporting structure involves financial reporting similar to traditional LPs, detailing investments and their performance.
• Microsoft, as an LP, is also interested in insights into the startup ecosystem and innovation trends.
• Corporate VCs focus on making financially sound investments that also yield strategic benefits for the parent company.
• The LP relationship in corporate VC includes broader reporting on innovation and market trends, beyond just financial metrics.

"And that means that we have to report to Microsoft. Just like lps, you need lps would like to get reported."

This quote explains the reporting relationship between Microsoft Ventures and its sole LP, Microsoft, which requires both financial and strategic updates.

• The venture capital sector historically suffers from a lack of diversity.
• Traditional paths into VC are challenging and contribute to the diversity issue.
• Corporate VCs have more flexibility in hiring and can promote diversity more effectively.
• A diverse group of investors is beneficial as it reflects the diversity of the end customers.
• Corporate VC models can train and take chances on individuals, leading to a more diverse workforce.

"And I think corporate VC lends itself a lot more to diversity."

The quote suggests that the structure of corporate VCs better supports diversity in the workforce compared to traditional VC models.

• Personal reading preferences can offer insights into an individual's interests and thought processes.
• Understanding the food supply chain and questioning established systems can be analogous to venture capital practices.
• The preference for books like "The Omnivore's Dilemma" reflects a mindset of in-depth understanding and critical thinking.

"One of my favorite books is the omnivores dilemma and you'll ask me why."

This quote introduces a personal favorite book, providing a segue into the speaker's reasoning and drawing parallels to their professional philosophy.## Understanding the Entrepreneur's Journey

• Entrepreneurs' presentations are often judged without understanding their journey.
• Michael Pollan's approach to food criticism is admired because he immerses himself in the food supply chain before passing judgment.
• This approach adds credibility to his opinions on food.

"We don't really understand the journey they went through, why they actually created what they created."

The quote emphasizes the importance of understanding the background and process that leads to a final product or presentation, rather than just assessing the end result.

• Desire for a more flexible VC model that isn't "one size fits all."
• Concern that large funds are constrained by the need to deploy large amounts of capital, potentially missing out on funding fundamental innovations.
• There is a need for more investment in core technology, such as semiconductors and hardware, which underpins software but is currently overlooked.

"I would like to see a more flexible model all around where it's not one size fits all."

This quote expresses the speaker's desire for a venture capital industry that can adapt to different types and stages of investments, rather than being restricted by rigid structures.

• The speaker's mentor was Dr. Paul Jacobs, the CEO of Qualcomm.
• Mentorship came from the trust and leeway given by Dr. Jacobs in making investments that did not have a direct line to Qualcomm's immediate interests.
• The philosophy of trust and strategic vision influenced how the speaker hires and trains their team.

"He basically said, okay, I understand that you cannot trace a direct line between the investment and Qualcomm, but I understand where you're going."

The quote reflects the mentor's understanding and trust in the speaker's strategic investment decisions, even when the benefits to the company were indirect.

• Success is measured by the ability to influence corporate strategy through investments.
• The goal is not only to make money but also to have a positive impact on the company's direction and potentially contribute to societal good.

"That's how I measure success. We always have to make money, but on a broader level I want to be able to influence the strategy of the company I'm investing on behalf of."

This quote defines the speaker's criteria for success, which goes beyond financial returns to include strategic influence and societal impact.

• The speaker's recent investment was in a company called Kahoot, based in Oslo.
• Kahoot's mission is to make learning more engaging for children through gamification.
• The decision to invest was influenced by the speaker's personal values and seeing the positive effect of Kahoot's approach on children's learning.

"The reason I said yes was not only did I like the management team, which of course you have to, and the numbers were good, but when I really said yes was when I saw videos of kids engaging with their teachers on complex subjects using Kahoot and how excited they were."

The quote highlights the speaker's decision-making process for investment, which includes management quality, financials, and the tangible impact on the target audience.

• The speaker's work in corporate VC is driven by the ability to influence corporate strategy.
• Investments are a means to provide informed insights to senior management, leading to strategic changes.

"If I am a strong enough signal that I am responsible in some small way to change corporate strategy for a large corporation."

This quote conveys the speaker's aspiration to be a catalyst for strategic change within a corporation through their investments.

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"Greenhouse currently works with over 1500 of the world's most innovative companies."

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