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Narasin started his first company when he was 12, before founding FashionMall.com
There has been a big debate over the last few years over whether the Series A crunch is real or not.
What everyone can agree on, though, is that there are definitely more seed and early stage funds now than ever before, and more people willing to give money to young companies looking to make it big.
But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?
We're highlighting key members of the community to find out.
Ben Narasin is a General Partner at Canvas Venture Fund.
Before joining Canvas earlier this month, Narasin most recently ran TriplePoint’s seed-stage practice. Previous to that, Narasin was a serial entrepreneur for 25 years. As a 12 year-old entrepreneur in Atlanta, he turned a $50 investment in his comic-book resale company into more than $1,500 at a single trade show. His entrepreneurial experience culminated with the IPO of FashionMall.com, a NYC-based ecommerce startup he founded in 1993. FashionMall.com debuted on the NASDAQ in 1999.
VatorNews: What do you like to invest in? What are your categories of interest?
Ben Narasin: I have three areas of focus, and one general life ambition.
I like to do fintech and marketplaces, both related and unrelated to e-commerce. I invested in Kinnek, which is a marketplace for SMBS. With mobile I've been investing since three weeks after the iPhone was created. There's still enormous opportunity since it's a nasicnet space.
On a macro level, when I invested in Lending Club in 08 there was no such thing as fintech. When I invested in Dropcam, where was no IOT. When I invested in Page Once, which became Check, which sold to intuit, there was no app ecosystem.
I don't need something to fit my thesis. I'm looking for the entreprenuer that creates the next thesis. I don't like to hear, 'Ben what's hot now?' The answer answer is that's always the wrong question. What they need to do is tell me what will become hot three to five years from now. You can't jump on a train that's already moving. The next big thing, I want entreprenuers to bring me ideas, and say, 'Five years from now it's X, and that didn't exist until I invested in 2015.'
VN: What would you say are the top investments you have been a part of? What stood out about those investments in particular?
BN: Lending Club is the oldest, and certainly the first one in my portfolio to go public.
I heard Renaud Laplanche, founder and CEO of Lending Club, on NPR as I was driving to work and I said, "This guy has new idea and vision for the future. Oh my god that's a pheonimnal idea." I chased him down, and it took me a while to meet him. I can't get to yes in one meeting, but can get from no to I want to spend more time with you.
Dropcam came to me through a friend in venture and I loved it so I seeded it.
To raise money, entreprenuers have to kiss every frog they can find, and turn over every rock. It's the same thing when you're finding the new companies.
My entreprenuers are a phenominal source of dealflow. What's unexpected is that it's people I've turned down send me their friends. I'm pretty candid, and I have no filter so I give precise feedback. Even if I don't invest, if you have dedicated yourentire life to the entrepreneurial spirit, you deserve the hour. Even if I know I'm not going to invest 15 minutes in, I'm still happy to add value.
I have dedicated my entire life to the entreprenurial spirit, so you deserve the hour. Even if I know I'm not going to invest 15 minutes in, I'm still happy to add value.
VCs have to go out everywhere. There's a whole range of things, like demo days and trades show, but I also go to keggers, wafflebakes, any place that entreprenuers go. The only way you get lucky is by working hard.
VN: What do you look for in company's that you put money in? What are the most important qualities?
BN: I have a saying that I use a lot, that you need five things to make investments: people, people, people, a great idea, and a huge market, if it works.
I look for high quality talented people. Not generally just because they're smart and great, but because they are willing to take that binary risk. With any investment I am at risk of losing all my money, so the upside better be tremendous, and world changing in the category their in.
It isn't about incremental changes, it's about businesses that represent an existential risk. Zenefits represents an existential risk to the entire insurance brokerage industry. That implies a large outcome. I'm not interested in a company that raises money and then sells for $100 million. I want more Lending Clubs.
When it comes to people, they gotta be smart, but that's assumed. If they weren'y they wouldn't be anyone I would be having a conversation with. The filters would have prevented it. They have to have tenacity. If they not willing to die for their startup, they should be incredibly hard to kill. Surviving long enough to be right is a critical part of success. Every entreprenuer has stared into the valley of death and had some dark diffficult times. Something happens, you gotta get through that. What's that saying? Winners never quit, and quitters never win. If something is impossible, entreprenuer don't understand that so prove that it isn't impossible. They make it so it used to be impossible, but now it's just highly improbable.
When everything lines up right, it can be tremendous. I'm sure I will find someone, someday, who is so incredible I just have to bet on them. Out of 75 deals where I written checks, there have been maybe three where I said to the person, "I'm not entrirely convicned of you idea, but you're so good I want to invest in you anway."
VN: What kind of traction do you look for in your startups? And can you be specific? Are you looking for a number of customers or order volume?
BN: It varies. It's very case specific.
As a Series A investor, versus a seed investor, it will be higher than what I had to see before. If they have an app and it's live, I need to be able to see a meaningful amount of people using it in a meaningful way. If it's an e-commerce startup that's live, then lets face it, they have to have economics to share.
Still, sometimes they don't have to have it all ironed out in terms of their vision.
VN: Tell me a bit about your background. Where did you go to school? What led you to the venture capital world?
BN: I have been an entrepreuner for 25 years. I started at 12 years old and did it until I was 37. The last company I started was Fashion.com in 1993 in NYC. I took it public in 1999. After that the world collapsed so I moved west and I ended up out here 12 years ago. I was semi retired, writing about food and wine and I started to think I could do one of three things: I could found another startup, I could parachute into another company or I could figure out venture. So I started looking around at the venture community and I noticed a growing gap between angel and venture.
In terms of angels there was Silicon Valley Angel and Sandhill Angels, but it was dispirate. It was once a quarter, very small checks and not a rapid process. There was too little money. And the billion venture firms were writing large checks, which were too much money.
I wanted to be in the middle, focusing on smart entrprenuers. The cost of starting a company had plummeted 99.7%, so to keep a company going for one year took $1 million but nobody was there to provide that check. I wanted to be an institutional seed investor, where I would do diligence, meet entreprenuers multiple times and once I funded the company show up to help. Over 8 years I did 75 investments, including Kabbage, Realty Mogul and Zenefits, which were phenominal entrepreuners.
I spent a lot of time with people in the venture community, which taught me how they acted. That was important to me. In 2008, when they were challenged, it was important to see how they acted when it was hard, not easy.
I'd seen VC as a NY based companyshow up a lot in these different company we were partnering with on the west coast, like Xcite, Yahoo, AOL and Microsoft. I was only familiar with venture from the outside, from my time at Babson, and their view of venture capital was “vulture capital,” so I was never that intriqued. I came to learn that that is an antiquated view, and once I moved out here, and explored it, I saw there were multiple realities.
I always thought of VC as investors giving you money, but what's great is that I get to give expertise, but there's an agrument for how long that lasts. At the later stage it's less likely that you're looking for value. What was impressive, what got me into the game, was when I saw that gap and wanted to fill it.
Because the gap had gotten so big, for eight years it was my dominant focus. I spent almost half my time getting to know partners at top tier firms, seeing how they work and how they think, so now I can sit down and I know what they need, whether they are or are not a fit. I can spend an hour choosing between 3 term sheets, and know why they should take one over the other.
VN: What is the size of your current fund?
BN: We raised $175M for our current fund, Canvas Fund 1.
VN: What is the investment range? How much do you put into each startup?
BN: We do a Classic Series A, so $5 million to $8 million is the optimital first check, possiblly $10 million. It's $8 million to $15 million if its Series B.
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?
BN: Like anyone else, 20% is the range, based on stage and risk. I'm a bit more opened minded and creative, and the bottom line line is those that are so stuck on those numbers limit themselves. I don't want to limit myself.
VN: Where is the firm currently in the investing cycle of its current fund?
B: We raised our current fund in August 2013, and have capital for roughly half a dozen more early-stage Series A and B investments.
VN: What percentage of your fund is set aside for follow-on capital?
BN: I prefer not to give you an exact percentage, but it’s one that’s worked well for our partners over the 8-18 years they have been investing in venture. It’s a very healthy reserve-to-initial-investment ratio.
VN: What series do you typically invest in? Are they typically Seed or Post Seed or Series A?
BN: Both Series A and Series B are important. As things go, I will be doing 60% to 70% Series A, but also really interesting things in B.
VN: In a typical year how many startups do you invest in?
BN: I will be doing one to two a year.
VN: Is there anything else you think I should know about you or the firm?
BN: I think about myself as a very paternal investor. Ultimately and always it's about the entreprenuer. I was an entreprenuer for 25 years, and I will be one until the day I die.
I currently live vicariously though other entprenuers. My job is to be their advocate and aid. A lot of people think differently, but if somebody wanted to understand me, this is all I've ever been and all I'll ever be and all I care about. I never cared about much else than being an entreprenuer, other than my wife and family.
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Lending Club is a social lending network where members can borrow and lend money among themselves at better rates.
Lending Club provides a much improved infrastructure for social lending: state-of-the-art technology to authenticate all users (ensuring making sure they are who they say they are); credit scoring systems which rate borrower risk; and, the automated clearing house (ACH) system to move the funds between both parties. In addition, we provide our LendingMatch™ system to minimize risk and allow community based lending.