The fund focuses on the collision of healthcare and technologyRead more...
Choi s also a venture partner at Partech Ventures, and was previously a partner with IGNITE Ventures
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.
Jai Choi is founder and managing director of Tekton Ventures.
Choi is also a venture partner at Partech Ventures. Prior to that he was a partner with IGNITE Ventures. Choi was an early employee at OnePage Software and previously co-founded On-Air Networks in 1997, one of the first online music services on the Internet, later acquired by Nokia.
Choi is an accelerator mentor to Mucker Labs, SparkLabs and Draper University. He received a Bachelor Science from University of Southern California.
VatorNews: What is your investment philosophy or methodology?
Jai Choi: I'm a little different since I'm a part of two funds. One is Tekton Ventures, and the other is Partech Ventures, as one is an offshoot of the other.
I started Tekton as early stage seed fund six years ago out of Partech, which has been around for since 1982. It's transatlantic, has offices in SF, Paris and Berlin. So I spend time between those two funds.
The reason I do two funds is that back in 2009, Partech didn’t have a formal seed fund, so I founded Tekton, which ultimately became a separate fund. I evolved Tekton into more of a global oriented early stage fund that invests around the world; deeply rooted in the Valley, transatlantic investments in Europe, including Berlin, U.K. and France. Given my prior Asia investing experience, we also make investments in Korea, China and India.
We are uniquely structured to leverage a network of scout partners around the world to make seed stage investments globally.
Our view of the world is that innovation continues to globalize rapidly. We are seeing ecosystems transform at a rapid pace, and we believe that the best entrepreneurs are not just in the Valley, but anywhere. Although we focus on certain geographies given our experience, we continue to be very active in the Valley given our networks. We also map out trends and opportunities we believe can be replicated in other markets, but modified based on those local markets. We are less domain focused, and more about entrepreneurs, at the end of the day.
Tekton in Greek means "builder," so we seek to partner with company builders from the earliest of stages to help them to scale businesses. That’s where we start, where we can drive those types of investments.
VN: What do you like to invest in? What are your categories of interest?
JC: We have close to 50 companies in our portfolio, and they are in two or three buckets.
We have a healthy focus around innovation that can be driven through some sort of data or software technology. Every company and team needs to understand what is their proprietary edge. We seek founders who have experience, technology or some angle in the market they can exploit. What drives our startups are the teams and how they execute across data, SaaS or cloud. The next generation of enterprise, every industry will be driven through data, companies that take very interesting approach using machine learning and AI to disrupt e-commerce or the industrial supply chain.
The other bucket we look for is innovation that can drive network growth. The explosion of mobile is permeating across the entire world in terms of adoption. So we look for consumer innovation around mobile, marketplace economies, next generation commerce.
We are fundamentally long about entrepreneurs who have the passion to disrupt industries and seek to disrupt the status quo and solve fundamentally rooted problems.
VN: What would you say are the top investments you have been a part of? What stood out about those investments in particular?
JC: One of our earliest investments was Coupang, we were one of the first seed investors. They are based in South Korea, and have now become one of the fastest-growing and most disruptive Internet commerce companies in the world. It recently raised over $1 billion over the last couple of months from Softbank, and it continues to be dominant leader in the market.
Another one out of Korea, which just a coincidence, is becoming one of the largest cosmetic brands, called MeMebox. It started in Korea, and just launched business here, and has also seen the opportunity in China. They've raised $30 million and they're continuing to execute. You're probably going to be hearing more about the company shortly, since they have opportunity to disrupt the beauty products industry overseas.
In the food delivery space we invested in EAT Club, which is a corporate B2B lunch delivery service. We have a diverse portfolio including companies around the predictive data technology space, like Signifyd, Attune, Brightfunnel to consumer and commerce brands including Plae Shoes, Cotopaxi, Petnet, and Virtuix.
VN: What do you look for in companies that you put money in? What are the most important qualities?
JC: This is where we get into the art and science of investing.
Everyone who comes in, in some ways, has a different profile. There has to be something in their background or experience. What is it about the team or founder, around that domain, that gives them a leg up or an advantage, either through knowledge or experience, or some problem they’ve experienced, either personal or professional, that allows them to build a high quality product or service better than others?
The framework we try to take is, at the core, we spend a lot of time with the entrepreneurs to understand their motivations. By the time we are referred to an entrepreneur, we assume high caliber of experience and/or aptitude, but do they have the conviction factor and drive to succeed across multiple cycles? We believe there needs to be some variable of a founder/team X factor. Grit and perseverance to be driven, not just by monetary factors, but by something that they see that others might not see. They need to exploit that advantage at scale.
We also try to understand how entrepreneurs think and how they approach and solve problems. The entrepreneurs in our portfolio tend to balance out the passion for the opportunity when the going gets tough. They are also pragmatic with a deep appreciation for information and data to measure and learn. It might not come through in the initial conversation, but as we get to know the entrepreneur, who is building a company from scratch, we see the framework and the process and way they view the business. Entrepreneurs that capture that framework, using data to their advantage, have a leg up. That's what we try to look for, even in this fundamentally early stage.
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?
JC: The short answer is we are team biased first so backgrounds and prior successes are critical. We also look for the idea that is disruptive and is in a big market. We take market bets, and that's going to be heavily weighted, but it’s the teams at the end of the day.
VN: Given that these days a Seed round is yesterday's Series A, meaning today a company raises a $3M Seed and no one blinks. But 10 years ago, $3M was a Series A. So what are the attributes to get that Seed round? Since it's a "Seed" does it imply that a company doesn't have to be that far along?
JC: The reality today in the Valley, and this is also happening globally, is that you see trends and valuations creeping up. There is a natural tendency for risk taking, given the supply of capital and frothy valuations that have gone up. Most companies, typically, look at a rough $2 million to $3 million Series A, The way I advise entrepreneurs is to raise capital at this early stage based on the team or how much product market fit they require. They don’t have to have millions of users, but they have to have demonstrated this product fit early in first 12 to 24 months.
The broad bucket around seed are team bets, or you’ve got a good traction product, an attractive market or space. It depends on the amount of capital in the early seed fund. If it’s typically raising $2 million to $3 million, generally speaking you want sufficient runway to be able to demonstrate product market fit to raise the next round. You want to be able to raise multiple rounds, post seed, Series A and above. Do they have a credible team, do they solve certain needs or problems, and do they have a credible operating plan?
What I always caution entrepreneurs about is also underestimating the amount of capital needed to raise to get to the next milestone. There has to be balance between dilution and risk mitigation on various factors. Entrepreneurs decide to raise X amount she’s targeting, but why don’t you raise a little more for a ‘what if’ scenario + cash buffer?
VN: What are the attributes of a company getting a Series A?
JC: We fundamentally believe that company building is not going to be done overnight. It's done in various cycles. We don’t try to reinvent the wheel on company venture building. What risk can an entrepreneur remove at this early juncture of company to get to the next stage of company? Team risk, market risk, etc to get to product market fit. From a risk standpoint, do we see some framework removing inherent risk?
VN: Given all the money moving into the private sector, I believe there's more money going into late-stage deals in 2015 than there was during the heyday, back in 2000, do you think we're in a bubble?
JC: I wouldn’t qualify it as a bubble, but asked differently, is there a lot of capital around table for early stage and seed? Yes there is, as it's an entrepreneur favorable market, and access to capital has never been easier.
What is the propensity for potential excess? That’s a bit concerning to what's going on in market environments, all the billion dollar companies, and crazy valuations. The fundamental thing I pay attention to in our portfolio, and our companies we see, is that we still have to believe that there is a huge opportunity for disruption. The whole environment to be able to innovate is so attractive today new technologies and platform migrations happening today from mobile to VR to blockchain to drones and robotics. We see more defining companies in this generation, with mobile and the shifts that are happening. We do believe there's going to be a correction happening, which is inevitable, since we can't be in this growth cycle forever. How do we mentor our entrepreneurs and help them navigate?
VN: If we're in a bubble, how does that affect your investing?
JC: Because we assume that companies take a long time to build, it's not that we don't care, but it's hard to pay attention to that when companies take seven to ten plus years to become scalable.
Something I believe every investor has to keep in mind, is that they have to have the right market environment to take advantage of investing right now. It doesn’t change our investment philosophy or strategy, but it creates an interesting structure where we can be patient with our capital. At the end of the day, companies have to return capital to investors, and we want companies to have liquidity for all stakeholders involved for the innovation cycle to continue.
The short answer is hopefully the market will take care of itself, but we're not changing the kinds of entrepreneurs we are investing in.
VN: Tell me a bit about your background. Where did you go to school? What led you to the venture capital world?
JC: I was born in Seoul Korea and grew up Los Angeles. Ever since I can remember, I had a lot of part time jobs growing and the concept of work at a young age. From bussing tables at my parent’s restaurant to managing a local newspaper route on my bike, I grew up as the classic “latch key” kid with parents working all the time, independence was survival, and learning to figure it out through trial and error a part of life.
I attended USC, studied finance and economics, thinking it was the fastest route experiencing the real world. So my first real job out of college was in management consulting at what is now PA Consulting Group, worked on Telecom and Energy/Utilities industry.
In college, I had started a consulting club on campus because there weren’t many consulting firms coming on campus to recruit at the time so I started the first consulting club on campus selfishly to bring the recruiters to me. Starting the club was a lightbulb moment for me, as it was a problem I personally experienced for myself and wanted to solve for me and many other friends and students looking for consulting jobs at the time from the college.
Fast forward, after working in consulting, this thing called the Internet was just taking off, by chance I met a alum of my college, who was as successful serial entrepreneur, who had built one of the largest privately held ISPs at the time, and joined him to co-found a company called OnAir Networks, an online radio company, sort of a predecessor to Pandora/Spotify on broadband challenged networks of RealNetworks/WindowsMedia Player. We raised over $40 million of venture capital over a few years, got to experience the ups and downs of the bubble, eventually the company was acquired eventually sold to Nokia and Muzak. I had been involved in a couple other early stage startups called Onepage eventually acquired by Sybase.
After OnePage was acquired, post bubble 2000, I was contemplating what I wanted to do in my life, I knew I wanted to be in an environment I could learn and be around people who I could learn from. I had been exposed to venture capital through my startups and started to have a handful of discussions with friends who were VCs. I was introduced through a friend to a fund called Ignite Ventures, which was building a cross-border US/Asia fund, started by a former corporate executive out of IBM and Sega. They had been looking for a younger partner to join as they had just raised another fund. I joined and helped run a couple early stage funds, investing in mostly consumer technology for over 6 years from 2001 to 2007, spending many trips to/from SF to Japan and throughout Asia helping portfolio companies to expand to Asia.
After Ignite, I had the opportunity to join Partech Ventures, a transatlantic early stage venture fund where I currently help run the US seed/early stage investments. I also founded Tekton Ventures, a seed fund after a couple years of joining Partech as an offshoot independent fund to focus on seed stage investments globally.
VN: What do you like best about being a VC? What makes you excited?
JC: Selfishly, I got into venture capital to be in a learning environment and learn from amazing people that are innovating every day. Given this is an apprentice driven business, I also believe in paying it forward for the next generation of entrepreneurs and venture capitalists who I have been fortunate enough to be working with. I think what I truly love about the business is helping people and serving our entrepreneurs.
What I love about being a VC is that it is a truly a service oriented business. Every venture capitalist has different tools and experiences that fundamentally help them serve others, but if you don’t have the servant mindset to be helpful to your companies or fellow partners, its going to be a long and painful ride for everyone involved.
The other thing about VC that is exciting to see today is that the industry is also evolving and being disrupted across multiple mediums. Whether that be Angelist turning the funding environment on its head to VCs using data in ways to gain an edge on the business. A whole new category of emerging venture managers have been starting new funds globally. From the pre-seed/seed/early stage, new funds are being created in the current venture cycle. This generation of venture capitalists calls for a mindset of innovation in the industry not only to survive but to thrive and continue to serve the best entrepreneurs. Its not only an exciting time for entrepreneurs building new category technologies but also the venture capitalists looking to back category defining ideas as the entire venture ecosystem is changing to meet the market demands of tomorrow.
VN: What is the size of the current fund?
JC: We don’t publicize our current fund size as Tekton is a global seed fund that has a unique evergreen structure, LP capital comes from a select group of large European endowments today.
VN: What is the investment range? How much do you put into each startup?
JC: We make up to 20 investments per year roughly check size of $300,000 to $500,000 with follow-on capability.
VN: Is there a typical percent that you want of a round? For instance, do you need to get 20 to 30% of a round?
JC: No. We are flexible on ownership, but market commensurate based on each opportunity, we typically participate in first institutional seed rounds where an anchored round syndicate comes together vs party rounds. We can do pre-seed rounds with strong experienced teams with big vision. We prefer not to lead a round at least in US, have capital capacity to be a meaningful contributor to the round, can co-lead rounds with fellow investors.
VN: Where is the firm currently in the investing cycle of its current fund?
JC: We are actively investing today and for foreseeable future given the amount capital we have raised given our evergreen structure.
VN: What percent of your fund is set aside for follow-on capital? What is size of fund?
JC: We allocate up to 50% for follow-on.
VN: What series do you typically invest in? Are they typically Seed or Post Seed or Series A?
JC: We focus on institutional seed stage, will consider opportunistically other stages including pre-seed, post seed, Series A.
VN: In a typical year, how many startups do you invest in?
JC: Up to 20 investments per year at current pace but no perquisite for number of investments as long as we can align with great company builders at the core.
VN: Is there anything else you think I should know about you or the firm?
JC: Our investment thesis is that Tekton Ventures is an early stage global technology focused seed fund. Invest in company builders at the core; ambitious founders that seek to build category defining companies at scale.
Our unique approach rests on the premise that innovation hubs are developing globally in real-time and nowadays the best technology investments are as likely to be found in Beijing, Seoul, or Bangalore as in San Francisco, New York, or Los Angeles.
We have an international co-investment network. Our team travels around the world to access early stage opportunities in key geographic pockets of innovation, like San Francisco, Korea, China, India, and Europe. We have built an intimate network of affiliate investment partners with deep local knowledge in their respective geographies for early stage investment cooperation.
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