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Firm celebrates 20th anniversary and explores VR/AR and drones
As entrepreneurship has become a global meme, with the title of "Founder" worn like a badge of accomplishment, there's no shortage of emerging investors on hand to fund these wide-eyed optimists.
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.
Michael Yang is Managing Director at Comcast Ventures, a Bay Area-based, bicoastal, multi-stage venture capital firm that just celebrated their 20th anniversary.
In the early Internet years, Yang served as e-commerce and interactive marketing partnerships consultant at AOL. Then, in 1999, he was on the receiving side of venture capital as Senior Director of Product Marketing and Business Development at Zaplet, a cloud-based platform delivering governance, risk management and compliance (GRC) solutions founded in 1999 and acquired by MetricStream in 2004.
His dive into investing began in 2002 with the trans-Atlantic firm Atlas Venture in Boston, where he focused on early-stage VC in IT/enterprise software companies.
Later, in 2005, he joined Yahoo!, where he served as Vice President at the Media Group and the Local Markets & Commerce Division until 2008.
Yang holds an MBA from the Harvard Business School and a Bachelor’s in Economics from the University of Pennsylvania.
VatorNews: What is your investment methodology?
Michael Yang: I like to take a thesis-driven approach to investing, to hone in on categories of interest that lead to major technology shifts and big-market opportunities. Then, on a top-down basis, I try to find interesting segments and trends to potentially invest in, and then go out and meet as many of the entrepreneurs and other VCs that are mining and playing in that space.
We’re stage agnostic, so for me it doesn’t matter whether it’s a seed-stage or late-stage opportunity. Our investors that look after different sectors and categories take independent investment strategies.
VN: What are your categories of interest?
MY: For myself, there are several categories of focus. I’m the lead on investing in all things healthcare and, for us, that usually means digital health, healthcare IT and healthcare services. I also lead our investing in VR [Virtual reality] and AR [Augmented reality], and that could be either on the consumer, or on the enterprise side.
More recently, we’ve been spearheading investment activity in the drones space, that’s a newer area – drones and robotics. Also, Internet of things [IoT], which could range from hardware and sensors to software and data businesses built off IoT. We subdivide IoT into different applications and verticals, like connected home, connected car, connected health and smart cities.
VN: What are some top investments that you were a part of?
MY: There are a few. In the healthcare vertical we’ve been a part of companies like BodyMedia, which was very early wearable pioneer device that sold and exited to Jawbone. We were also investors in Healthline, which is in the health information services business, and that exited in private equity. One investment in healthcare I’m particularly proud of is in the employer health market is called Accolade. They’re a single point of navigation and advocacy for employees and large self-insured employers in the U.S. We’re also involved in a bunch of interesting companies on the VR side in a newer market. Studios such as Baobab Studios and Felix & Paul Studios – these are content creators forging new medium and new content that VR consumers use when they buy a headset and endeavor into VR experiences. Baobab is producing animation features and Felix & Paul is focused on live-action 360-degree footage right now.
VN: What are the most important qualities in companies that you put money in?
MY: Team, first and foremost. We spend a lot of time with founders, or the CEOs, as well as think through the full team complement that needs to be assembled to go after opportunity. We like founders that are just ridiculously passionate about what they’re doing, committed to sticking through it. Most of these concepts that we invest in are disrupting something that is legacy, or the income business model. Obviously, there’s a big market opportunity, a pot of gold at the end of the rainbow, as the saying goes, but I would always start with the team.
VN: How long does it take before you meet a startup and make an investment and how do you conduct your due diligence?
MY: Because I like to research this sector, usually, I will know of the company and have some thoughts and opinions in this space, so most of the time that we spend on diligence is building a relationship and team, and making sure that we’re aligned on vision.
What are we trying to build here? Where do you want to take it? How long do you, founder, want to be driving it? Where do you think your strengths and weaknesses are, and how do we buttress them?
It’s building a relationship.
I’ll be honest: I don’t like scenarios where you meet a company and they’re expecting term sheets in two weeks. It’s too short to really build a relationship, and I’m very quick to say: hey, that’s not for me at this particular round. Because we’re a multi-stage firm, we would be happy to consider your next fundraise. We should just start on building a relationship, making sure that I’m the right investor for you and vice versa.
Mostly, in the investments I make, I lead the rounds; therefore, this one-on-one relationship with the CEO, or the founder, is paramount.
VN: What kind of traction do you look for in your startups?
MY: I’ve done several seed investments, where the product or service hadn’t launched. Last year, I spent the bulk of time incubating a company from scratch with the founder and other co-investor. So, there was nothing other than the notion and an idea [This startup is in the health employer marketplace and will be announced in May].
In later-stage opportunities we look at more typical revenue metrics. In many of the hardware-centric businesses that I’ve been affiliated with there was some incoming demand. Maybe the hardware product hasn’t quite shipped yet, but has launched through pre-sales, or Kickstarter, or other kind of notional data. [I look for] a sense and some confidence that there is real demand for that product, and that you will achieve product/market fit.
VN: What is the size of your current fund? How many startups do you back in a typical year?
MY: We don’t disclose the size of our fund. I can just let you know that, typically, we invest north of 20 deals a year, and we just celebrated our 20th anniversary last month.
VN: Is there a typical percent that you want of a round?
MY: It differs by stage of investing. Obviously, if we’re incubating companied doing seed-stage investing or Series A, we’re looking for more ownership. Because we’re multi-stage, we are happy to do mid- to late- stage investing. The ownership percentage there can be less, so it’s not set in stone, it’s flexible, tied to when we enter a particular deal.
VN: Where is the firm currently in the investing cycle of its current fund?
MY: We are very active, towards the beginning.
VN: What percentage of your fund is set aside for follow-on capital?
MY: For every investment that we make, we think of reserves and do a proper allocation exercise. It’s a hard question, because it depends on the stage. In some of the frontier tech sectors, like drones and VR, we need to be more thoughtful and probably reserve a little more and expect a longer time concept. Obviously, In other situations, where you may be more mid- to late-stage, approaching exit or liquidity, we don’t have to reserve as much.
VN: Today a seed round is yesterday's Series A, meaning a company raises a $3M seed and no one blinks. How does that change the investors’ expectations of a company?
MY: It ratchets up the expectations on the founders and the management team, for better or for worse.
You have access to more capital, so you expect to get further down the road. With that capital, we’re probably looking for more proof points, more semblance of product/market fit. At the earliest stages, you would expect more of a complete team built out. I think more capital is beneficial in a lot of the sectors that I invest in because it is going to take that VR/AR further, and drones tend to be a little more capital-intensive, given the AR in terms of adoption life cycle. Founders have more capital at their disposal to move the ball forward, but investors expect more for it as well.
VN: Tell us a bit about your background. What led you to the venture capital world?
MY: As an undergrad, I was management consultant, worked for two of the major consumer Internet companies during their heyday. The first was AOL, or America Online, back in late 90s. During dial-up days, AOL was the front door to the Internet. Then I was at Yahoo! in the mid-2000s, when portals were still the main thing just as the world was turning search-driven.
I cut my teeth in business development; I was General Manager for P&L [Profit and Loss] Responsibility. I also worked at an enterprise software startup [Zaplet] here in the Bay Area during the first bubble, so that was my first experience as an employee in a venture-backed startup. I rode the rollercoaster up, and then all the way down as well.
This is my second time as VC. I learned the foundations of venture capital business at Atlas Venture, where I focused on enterprise investing and really progressed under several senior partners there, which I am grateful for. Now that I am at Comcast Ventures, as we had started the conversation, I’ve been leading the investment activities in healthcare and IoT, and VR/AR sectors. I am approaching my ninth year at Comcast Ventures.
VN: What do you like best about being a VC?
MY: VC is a very privileged profession.
You are constantly intellectually stimulated, learning new things, meeting fascinating passionate people who are pursuing their life dreams. I love servicing my companies and my founders, trying to help them think through things, open doors, navigate turbulent waters at times, and you never really know where the world is going to take you.
When I joined Comcast Ventures, I did not think I would be investing in these sectors that I invest in today. We just don’t know where technology is going to take you and what entrepreneurs are going to knock on your door.
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