If you’ve been following this column for the past couple of months, then you know that we’ve been trying to highlight some of the newer members of the VC community. But that doesn’t mean we want to ignore some Silicon Valley’s more experienced firms either.
This town has a deep bench of experienced firms and investors, and there is a lot to learn from those that have been around for a while.
Maha Ibrahim is a general partner at one the valley’s oldest firms, Canaan Partners.
In the U.S., there are only 164 female VCs out of a total of 3,396 and Ibrahim has been involved in the venture capital and technology industries for over 15 years. She currently sits on the boards of ClusterHQ, Cuyana, Kabam, Komprise, Koolbit, The RealReal, Twenty20 and UNIFi Software.
Ibrahim holds a B.A. in Economics, an M.A. in Sociology from Stanford University, and a Ph.D in Economics from MIT.
VatorNews: What do you like to invest in? What are your categories of interest?
Maha Ibrahim: The firm is diversified firm. We’ve been around for 28 years, with one third of our investments in healthcare, and the other two thirds in tech.
On the tech side, we split between enterprise and consumer, and we’ve taken a more franchised model toward technology and investing by going deep in certain areas, such as fintech. That has been great area for us, with more than eight investments in that sector, usually early stage. Our largest exit was Lending Club, where we were Series A investors.
Marketplaces is another another and we believe in collaborative consumption. We’ve made investments in Instacart, we did a Series A for Cargomatic, and Washio, which is a collaborative consumption model for laundry and dry cleaning services.
We also do e-commerce, as well as cloud and big data, which is everything from dig data analytics, virtualization, storage, and containers.
We look at companies that broad enough to prove flexible, but deep enough to be prepared for disruption.
I am on marketplaces and big data. When I look at marketplaces I look for companies with excess capacity, either of drivers and trucks, or laundromats and clothing, where know I that there is availability in the market for assets to be shared in a more efficient way. Mobile is a huge driver of that, now that we can geolocate people.
VN: What would you say are the top investments you have been a part of? What stood out about those investments in particular?
MI: On the cloud side, companies like Metacloud and Virsto. We have have had a number of exits on the big data cloud side.
Metacloud was my deal, a Series A. Virsto was a storage virtualization company that was bought my VMWare. There was a massive disruption taking place because what started as virtualization is what is now containers. In addition, I always believe with big data and the amount of information that is being produced and that needs to be stored, there will be a need for better, cheaper, faster storage, so it is growing in a big way.
On the consumer side, Kabam, where were seed investors, and The RealReal, which is a large luxury consignment site.
VN: What do you look for in company’s that you put money in? What are the most important qualities
MI: Where we make money is when we get the market timing and the size right, as well as the right market fit. When we get all three of those together we know we have a winning company.
Of course the team is also important, but that goes into product market fit, because they are selling the companies products, but by far, those three elements are the most important.
Being early stage, knowing when you have those things is the biggest risk and the biggest question mark. We are not guessing at timing or size, because we can take educated guesses based on investments we made before. It’s also based on references and the diligence we have done in a space.
We tend not to rely on other investors for that knowledge, because want to do own our investments, and that is one of the reasons we go do deep in the franchise model. When we do that we get to know all the companies in a given space, the entrepreneurs and executives, even from smaller companies, and they get to know us. We have developed a corpus of information about a space, and what the pain points and opportunities are, so our guesses get to be educated guesses.
We get to be a lot smarter then if we were just generalists.
VN: Tell me a bit about your background. Where did you go to school? What led you to the venture capital world?
MI: I’ve been with Canaan for 15 years. I am from outside Boston, and I came to Stanford for my undergrad and after that I went back to grad school and got my degree from MIT.
I wanted to be an academic, but I decided I didn’t like the solitary aspect of academia. I wanted to go more into business so I got my pHD and joined the Boston Group in San Francisco. I was there for 7 or 8 months and I decided that being in a consulting firm was too academic. Plus, there was a big bubble going on. I joined Quest Communications, an upstart telecommunications network that was building out broad fast big telecommunications network, where I was head of business development. When I was working with startups in Silicon Valley on the equipment and content side I figured out what content was going to highlight the speed and breadth of the network.
Through this I developed a lot of relationships on the venture side, which allowed me made to make that jump. This is the most exciting job, because I get a front row seat to technology trends, the opportunities and everything that goes into being a founder and and entrepreneur.
VN: What is the size of your current fund?
MI: We have $4.2 billion under management, and our most recent fund closed in the fourth quarter of 2014, a $675 million fund.
VN: What is the investment range? How much do you put into each startup?
MI: We will do seed deals, so we put between $1 million and up to $20 million, but the sweet spot is between $3 million and $10 million in the first investment.
VN: Is there a typical percent that you want of a round? For instance, do you need to get 20% or 30% of a round?
MI: At least 20%, and by going early can do that and sometimes higher.
VN: Where is the firm currently in the investing cycle of its current fund?
MI: Since we just started in Q4, it’s very early.
VN: What percentage of your fund is set aside for follow-on capital?
MI: Usually we put $2 for every $1 we invest off the bat, with the exception in seed rounds. If we put $1 million in a company, we typically dont think we’ll put in $2 million the next time, it is going to be much more.
VN: What series do you typically invest in? Are they typically Seed or Post Seed or Series A?
MI: The sweet spot is Series A. 80% of our investments are seed and Series A deals.
We’ve done Series D, so we go high in some late stage, but by no means do we want to compete with late stage investors.
VN: In a typical year how many startups do you invest in?
MI: Roughly 15 companies per year
VN: Is there anything else you think I should know about you or the firm?
MI: We didn’t do this consciously, but we have eight general partners, and two of them are women. So why is that interesting? Like I said, it’s not something set out to do, but 25% of the companies in our last fund had female co-founders or founders. We been a firm that, because of the diversified nature of firm, from a people standpoint, has really been more reflective of what diversification of entrepreneurial pool
We are seeing a shift, as more and more firms are trying to add women to their ranks. It seems as though the Ellen Pao situation certainly was a wake up call, and there have also been a fair number of other trends that have been happening that are opening Sand Hill Road’s eyes to the need for diversification, including Sheryl Sandberg’s book, and some of the dialogue and controversy among the more notable startups. There has certainly been a change in recognition, and that we need to be seen as more friendly to diversity.
About 20% of our founders in the most recent fund are female. We didn’t consciously set out to invest in females, but we were fortunate enough to keep meeting with incredibly impressive women. We believe our ratio is higher than that of traditional VC because our firm, having a diverse set of GPs (2 females), more accurately reflects the entrepreneurial pool and, as such, we appear to be much more inclusive and accepting of diversity.
When it comes to the track record of female entrepreneurs we’ve had incredible returns with our female entrepreneurs. But, this is a long term game so I wouldn’t read into returns numbers from years past. In a few years from now, there should be enough data on this most recent set of cohorts.
