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Operating Makes Better Investors (Sahiti Enjeti and Jamie Schneiderman) · Unstuck Pod

• Jamie Schneiderman: Hi everyone, welcome to the Unstuck Pod. Very excited today to have Saiti and Jetty here from Drive Capital. and really interested to hear her thoughts about a whole range of things, both from a founder point of view and from a investor point of view. So welcome. Thanks for coming. Sahiti Enjeti: Thank you so much for having me. I'm excited to be here. Jamie Schneiderman: Good. So can you start off by letting everyone know a little bit about your background, what you're doing, where you are? Like let's let's start there. Sahiti Enjeti: Mm-hmm. Yeah, so I'm currently based in Austin, Texas. so I grew up in Texas, born and raised in College Station. And after high school, I went to college in DC and I studied computer science. And so During that journey, I was interning at a startup in San Francisco for one summer. And it happened to be sponsored by a venture capital firm out in Silicon Valley. And so that was my entry point into tech and venture capital, was just very early on. And I really enjoyed the early stages of being at a startup that had just raised seed seed funding and then also getting to meet and network with venture capitalists in the valley at the time, and understand how, you know, the micro and the macro view of funding a company, but then also what it takes to create and build one. And so that ended up leading me to be an investor at True Ventures, which I joined there in twenty nineteen. And so I was on the investment team there for five years, worked side by side by an incredible partnership and got to really learn the ins and outs of the business, lead some investments and do portfolio work. And I was in those partner meetings every single week, you know, and was in the background doing the financial modeling. I was doing it all. And it was the best learning experience of my career. And I got to live in San Francisco and then also in New York. And so those took me to those cities. And I think when I got to True, I was nearing the end of around four, four and a half years there. And I realized that I had started investing in company or we were investing in companies that I but I had never worked at one. I had never built something myself. And so I felt this need to go and just develop range in my career, but also in my experience. And I felt like it was it was in it was affecting my ability to show up and actually connect with the founders and connect with the people that I was working with. It I just felt like there was a gap in my experience. And so I transitioned out of the firm after five years and then went to a portfolio company of theirs. It was a founder that I had known really, really well. And I was very early employee, I think like employee number seven. It was an AI transcription for lawyers startup. And I was a product manager there. So I got to serve the engineering team, but also just it, you know, there was a lot of cross-functional collaboration. And it was an amazing experience because it was also a seed stage startup that I had worked for. I was working directly with the founders and it gave me that Operational lens that I felt like was a gap in my experience. And so while I was there, I was there for about eight months. my current firm, Drive Capital, reached out and they wanted someone with early stage investing experience to build out a early stage portfolio in Austin. And so worked really well because I happen to have early stage investment experience and I live in Austin. And so They hired me about a year ago and I have been fortunate to make some investments here and really go deep in the ecosystem here. And so and that brings me to today. Jamie Schneiderman: Amazing. okay, so we'll talk about your we'll we'll come back to your current stuff, like where you are right now. I I'm curious from you that the most one of the most fascinating parts about what you just described and your background is you were an investor really first, and then went back to portfolio or went to the other the Sahiti Enjeti: Mm. Jamie Schneiderman: other side. Usually say the dark side, which is usually like Sahiti Enjeti: Yeah. Jamie Schneiderman: again, if you're a founder, it's the investor side. But again, it depends on Sahiti Enjeti: Mm-hmm. Jamie Schneiderman: how you want to look at it. What What surprised you most, you know, shifting gears and going to the portfolio side and seeing the world from that perspective? Sahiti Enjeti: Mm-hmm. I think as an investor, you it's a very vague job and the skills are they're more interpersonal. And so it's a lot about reading people, reading dynamics, and getting a high level of every company and opportunity that you're involved in. It's less specific, and operating is the exact opposite of that. You are beyond specific to the point where You know, you are evaluating the success of one button on your software or how someone interacts with one specific little feature within what whatever you're building within the company. And so it's it's a lot more of a meticulous type of role. And I think that's the biggest difference. And that was the biggest learning for me was that I had spent five years operating at such a high level, and I didn't necessarily have to be so detail oriented. Because at the end of the day, founders were coming to me and I was in more of a powerful seat and I had more of a say in decisions. And then going on to the operating side where I had no power and I had no say in what was being done. And most of my job was actually in the background and concrete, you know, creating concrete metrics around features that we were building out. And it was just so specific and in such a vacuum. And that's the biggest difference. And I would, you know, operating is 10 times harder than investing, without a doubt, which is why I think investors are so attracted to operators because it's, you know, we see equality that we want to to back. But you know, when you're in it, it's just there's so the workload and the volume of work that exists on a day-to-day, a weekly, a monthly, a quarterly basis. is just so much more and you have to hit those milestones. And every decision when you're operating, it's every contract, especially in the early stages at the seed stage, you know, every contract, every piece of revenue, every feature that you're building out has to lead to some type of outcome versus an investing. You make an investment at pre-seed and that outcome may or may not exist for seven to ten years. You just don't know. So it's it's a vastly different outlook. Jamie Schneiderman: And how so on to that, like like on that topic, how how has that changed your approach? I mean, I think you said it at the beginning where you're talking about, well, I felt like there was something missing, like I didn't know Sahiti Enjeti: Mm-hmm. Jamie Schneiderman: it. And so What have you changed since you've you know, been on the other Sahiti Enjeti: Mm-hmm. Jamie Schneiderman: side? Has it changed the way you look at things or do things? Sahiti Enjeti: Absolutely. There was a moment when I was a product manager where I was trying to automate a specific task that I was doing. And I had thought to myself, if I was an investor, now that I have had this specific pain point and this company was pitched to me, I would know how what that exact problem was because I have done it. And I think that was the biggest difference because I wouldn't need to talk to three different product managers at three different size companies to understand if this was a differentiated problem. I lived it and I breathed it. And so I know the specificity of the issue. And I also can evaluate if it's specific to just being a product manager or if this is something that can be deployed across an entire organization. And so I think it's really helped understand differentiation. In technology and how what products are are differentiated versus not, and then also how big or small is this pain point with at an early stage or at a growth stage, and it's definitely given me a lot more empathy for operators and founders overall because being inside of a company and you know, seeing the founders that I was working with, you know, they were young and they were giving up so much of their lives to make this work and living and seeing that, you know, and they were sp getting right off of a plane, rushing to a we work, trying to get on a one on one with me so we can pull this feature out. You know, those are really admirable qualities. And so it only just gave me more empathy for someone that does, you know, does the hard work and decides to quit their job and take a pay cut and or take no pay. And start a company 'cause you're you're working alongside with them and no one cares about what you're doing as more than they do. Jamie Schneiderman: So I think you've accurately described the the positive trade and the things that founders Sahiti Enjeti: Yeah. Jamie Schneiderman: take on and the struggles and things. I I'm curious about so you've been on that side, you've invested in lots of companies, your focus is in Austin is on early stage, as you mentioned. What what are the so let's flip it around the other way from an investor point of view? What are the things that you're seeing? from these guys or from like from the startups that you've Sahiti Enjeti: Mm-hmm. Jamie Schneiderman: invested in or that you haven't invested in whatever that where you're seeing that that are causing them continuous struggle. Like what are the things that are holding them back in your mind? Sahiti Enjeti: Mm-hmm. I think it's the common thing the common themes that I've seen across most startups that have failed. And I also want to say I've invested in companies that have failed. So, you know, I not everything has been a success. And though the failures are where you learn everything. And so the failures that I I think I've seen is one, it's a lack of focus early on. I think that we live in a market right now, especially with AI and growing valuations. I think that sometimes f some founders can get very comparative around what they're seeing in these larger news publications. And they're seeing these companies that are similar a spaces that it the as they are, and they just got a eight billion dollar valuation, or you know, th and so that I think that's a very specific distraction that can be removed. And so it's a lack of focus and then comparing yourself to others when, you know, in the inside, you don't actually know the mechanics of that investment. You don't know the mechanics of that deal. You don't know their revenue numbers. And so it's just focusing, I I have to refocus a lot of people and remind them of where they're at currently in their company journey. And warn them to just not get distracted and maybe obsessed with what the outside world might be telling founders how to be. I don't think that that leads to success. Jamie Schneiderman: no, and and I think it's a great point. I I'm curious actually as you talk about this, is it different in Austin than it was in San Francisco? Like how how geography Sahiti Enjeti: Yeah. Jamie Schneiderman: impacting it, those markets? Sahiti Enjeti: Absolutely. I mean, I think Austin is very different. And the founders here are not necessarily, I mean, they're not geographically connected to Silicon Valley. So they're not around that type of energy all the time. And I do think that that energy can be very motivating. You know, it is motivating to see someone raise more money and it is a competitor because it it requires you to be like, I I wasn't thinking about this. You know, I need to be better. so yeah, I think Austin is is different in in the way that. Founders here are they are equally as ambitious and they have just as bigger as big of goals as you would if you were operating in SF or New York. But it is a lot easier to cut out the noise because you're not in that co-working space in, you know, San Mateo or Soma and San Francisco, or you know, you're not in New York and in the you know, and meeting founder after founder after founder that's popping something up. And so Yeah, it's the the environment here is is a little bit quieter in that way, but you know, the articles are still public and so that that still exists. Jamie Schneiderman: So so and and so you know if the advantage is the it's you know quiet there's less noise, there's less Sahiti Enjeti: Mm-hmm. Jamie Schneiderman: there's less of the chaos and Sahiti Enjeti: Yeah. Jamie Schneiderman: i are there other are there drawbacks to being in a place like Austin, which, you know, has a lot of great things. So I don't picking on Austin, I'm just saying it's not like you said, S F or Sahiti Enjeti: Yeah. Jamie Schneiderman: New York. Sahiti Enjeti: Austin will never be Silicon Valley. Austin will never be San Francisco and it'll never be New York. It's just not the epicenter of what those cities bring. And so I think, you know, just accepting that and playing to the strengths that this city can offer is a way better approach than trying to make it something that it's just it's never gonna be. And so I do think that there are points of friction here in that sense of You know, there isn't as easy as access to capital at an institutional level. You know, most of the funds that have you know more than three one to two billion in AUM, a lot of them exist out in the valley. There's so much capital out there in San Francisco and in Silicon Valley and also in New York that exists. And so yeah, that app that that easier access to capital definitely is more scarce here. There is capital here. It's just not as much. And so And and at an institutional level, there aren't that many institutional funds here that can, you know, that reserve heavily can follow you throughout your life cycle. And so that's why firms like Drive and other firms that, you know, we have over three billion in AUM, we can serve as that great support system for those founders. But but that model is is rare here. Jamie Schneiderman: So, okay, so the the I get it. So the mo I understand that and I I appreciate Sahiti Enjeti: Mm-hmm. Jamie Schneiderman: it. So so let's I want to flip to sort of you and how you make a decision, how you look at it. So presumably if you're in a market like Austin, which is smaller, more focused, there aren't as many like you said, full full stage investors that can reserve money and and other things as you mentioned through the life cycle. how Do you so you're gonna have more opportunities, I assume, coming your way? That's that's a good thing. Sahiti Enjeti: Mm-hmm. Jamie Schneiderman: how so how do you differentiate? How how do you make your choices? How do you know I especially early, right? How do you know this is one I want to invest in, this is one I really don't? What are the factors that you're really thinking about? Sahiti Enjeti: Yeah. Regardless of whichever firm that a founder is pitching to, every investor is looking for two things at the earliest stages, which is team and market size. Those are really the only two things that we're talking about. And I would have place a really heavy emphasis now on market size. And so and it's always the TAM, the total addressable market is what we talk about. And so when it comes to a team, one is is the team Are they is there mutual energy that we might be a fit and you know we're we're gonna work well together? Cause this is a seven to ten year journey. This is not, you know, this isn't this isn't like six months. This is a long, long time. And so is their trust? Are you is the founder acting with integrity? you know, are they being truthful? All of that. I think that's really important. The second is their understanding of the market. Like, do they What is their background? You know, most founders are operators. So within the the the company that they're they're building, have they operated within the market that they're going after? And that helps really well because they can make they are they can make strategic introductions to customers right off the bat, versus if a founder is building in a market they've never built in before, it might be harder to make those industry connections. And so we're looking for just their understanding of the space and the market. And then, you know, the other part is do they are they the type of person that is going to work 247 on this problem and is deeply dedicated? You know, the types of founders that I've invested in, I think it's a great sign if they miss a call with me because they're too busy building. I think that's an amazing sign. I don't want to Jamie Schneiderman: Mm-hmm. Sahiti Enjeti: be investing in people that, you know, are constantly they can be on time, but they should be like, Okay, I need to get back to building. You know, one of the founders that I've invest in here. I invited him to a Saturday event that we were doing for South by and he missed it because he was debugging code. And I was very happy about that because those are Jamie Schneiderman: Yeah. Sahiti Enjeti: the types of people that I want to be investing in. And so that those those are the different characteristics that we look for on the team side. And then on market size, you know, at an institutional level, when there we have over three billion dollars in AUM and especially any firm that has around a billion or over a Over the billion dollar mark in AUM, the market size has to be massive, massive, even within the initial wedge that the company is building in. So, you know, in order for us to get excited about an investment, the initial wedge that the company is trying to capture within the market, the US revenue has to net to around a billion dollars at a minimum for us. Because Our return profiles can't support a market size of six to seven hundred million. That's specific to the firms that I have worked at. That doesn't necessarily mean that you won't be able to raise if your TAM is at six, seven hundred million or something like that. But I do think that there are you know, I do see a lot of founders sometimes underestimate their TAM and then you know, six hundred or seven hundred million or those those type the hundreds of millions TAMs are definitely viable. They're just not going to be a fit for an institutional fund like ours or others because we have to see at minimum a billion dollars of US revenue in order to even consider an investment. Jamie Schneiderman: So sorry, when you say I billion dollars in US revenue, I'm talking about total revenue in the market, not necessarily grabbed if okay. No, no, I I like you said, Tam, I'm just trying to make sure I'm understanding. I was like, okay, so Sahiti Enjeti: Yeah. Right. Mm-hmm. Mm-hmm. Jamie Schneiderman: so all right, so interesting as you start to think about that. Let me let me so so as you start talking about it, I know your focus is primarily early stage, very early stage, and but the firm goes beyond that. So, so W you know, if you're trying to get somebody, you mentioned also seven to ten years, if you're trying to get someone along and successful over seven to ten years, what do you see your role as? What do you do? I mean, there's money, I get it. maybe some governance. What else? What other things are you are you helping with or doing or focusing on? How d how does it typically work with you? Sahiti Enjeti: Think at a qualitative level, it there's so much value in just being there for the person. That you know, the founder doesn't a founder and a CEO doesn't want they don't have a manager, they don't get a lot of feedback on how they're leading, and it's a very lonely journey. And so I think an investor can serve as a really just great confidant and and person that this that this founder can lean on when the business might be going Down or hard moments are happening and getting advice. And so I think that's a really massive part of the relationship is whenever a founder has questions, you need to make sure that there's safety for them to ask questions and not feel like you know they have that potential future funding is is at risk. And we spend a lot of time advising these founders on, you know, it can come down to contract negotiations with customers that they're having and they're not sure how to price it or they're not sure how to pitch it. And there's also a lot of support that happens when a company is about to go and raise another round of capital. And I think that is a massive part of of the journey too, where, you know, most of these founders are either first or second time founders. They haven't raised a series A round or a series B or a growth round. And so how can we support them and I'm in probably one to two practice pitches per week, just helping people and giving them feedback on their pitch and how they should be framing market size. I go through slides and tell them, you know, this is your this is how you're marketing your TAM. We need to rephrase the wording here because someone is gonna pick up on a red this might be a red flag. And so there's a lot of support around, you know, gearing up to raise another round. And then the other part is just the logistics of, you know, hiring. And you know, this person, the founder probably hasn't hired a head of HR before. And so, you know, giving them support and connecting them with people internally, you know, we have a talent agency internally that helps portfolio companies hire people. and so it's about helping them make these hires and they they have questions around equity structures and compensation and how much they should be paying these chief people officers or whoever and how much equity they should be giving to an advisor versus a co-founder. those are all questions that cause we see them every single day. We're knees deep in cap tables every single day looking at percentage ownerships of of everyone. And so for us this is all common knowledge, but for them they're doing it for the first time. And so we we help a lot with just those those types of questions. Jamie Schneiderman: I mean it's great. I it's interesting for me when you talk about being a confidant. And I imagine that that is a I can speak to my personal experience. It is not easy to build the kind of trust that you need to from the investor side to get there. I I would also say that in a lot of cases, in the even the companies that I deal with, they don't even want to get recommendations for things or they stay away from recommendations that come from investors in a lot of cases. So Sahiti Enjeti: Mm-hmm. Yeah. Jamie Schneiderman: I imagine that you work very hard on a personal level to try to make people feel comfortable. And you have to prove it, right? So that's got Sahiti Enjeti: Mm-hmm. Jamie Schneiderman: to be an interesting experience. Like just a hard, it's a hard one to it's a hard it's a hard line to cross. But at the same time, if you could Sahiti Enjeti: Mm-hmm. Jamie Schneiderman: do it, amazing as I think everybody would like that, every founder would like it. Sahiti Enjeti: Yeah. It's honestly a joy. I I think it's a joy to be a confidant to someone and to have them be able to see you as reliable and to feel safe to ask hard questions to. I I never take it personally or I'm annoyed if I get a text from anyone that I've worked with at nine PM and with a question. I'm always happy to answer it because that's what my time is for and I genuinely enjoy it. And so yeah, it's such a joy. And I I always I come at it from a place of admiration for what they're doing. You know, they're doing something that I think is incredible. And so if I can be a part of that journey and help them get to where they need to be, it it's more of a joy than it is a it's never a burden. Jamie Schneiderman: Amazing. That's fantastic. so Any additional advice or anything that you wanna share with founders that are listening out there? Sahiti Enjeti: I think the number one thing that I see amongst founders, and I see this honestly amongst a lot of people, just in general in careers, is if you don't ask, you don't get. And so just ask for the person's time, reach out to the investor and ask if they want to meet with you and just be direct in what you want to talk to them about. I think sometimes founders can be a little bit afraid to be too forward and say, I'm looking for funding. and it's a bit of a hard conversation to navigate, but I will just tell you straight up, yes, you're a fit, or no, you're not a fit. And if you're not a fit, let me help you in other ways. I have a network of investors and operators and people that I can introduce you to and help you. But if you don't ask for the time and you don't ask for those introductions, you know, that that's a that's a then you're not gonna get it. And so that comes to asking investors, but also The best thing you can do is create a network of other founders in your in your circle that you can rely on too. I mean, community is so important. And have them introduce you to other investors. That is the best introduction that an investor can have. Is if I've backed someone and they refer me to someone, I will always take that meeting, even if it's not a fit because I'm like, well, that person is amazing and I love working with them. If they vouch for them, I'm taking that meeting. You know, that's someone that I want to know. And so I think just leverage your network and leverage. Just the power of asking for what you want. And I think that you'd be surprised by what comes back. Very rarely does anybody say no. They usually just either ignore you or they try to help you in a different way. And I think that's that's a understated and underused skill. Jamie Schneiderman: Awesome. I love it. How how can folks reach you, find you? Sahiti Enjeti: I'm on all the platforms. You can find me Jamie Schneiderman: Okay. Sahiti Enjeti: on LinkedIn. You can find me on Twitter. you can, you know, email me, citee at drive capital. I'm always happy to be a resource for people and you know, just help in any way, however I can. And whether it's a fit for our firm or not, I just wanna be a resource as people just try to succeed in their businesses and give them advice or insights that they may just not have been aware of. Jamie Schneiderman: Awesome. I love it. Listen, thank you so much for your time. This was great. I think everyone got a ton out of it. and hopefully get a lot of inbound interest around new investment opportunities. That would be great. So thank you very much for this. to everybody who's watching and listening, thank you. And until next time, enjoy. Sahiti Enjeti: Thank you so much.