John Vrionis is Managing Partner of Unusual Ventures, which he co-founded with Jyoti Bansal (founder of AppDynamics). Unusual Ventures is a new model for early stage venture investing and mentorship, and the solution for what John calls the seed funding gap.
Prior to founding Unusual Ventures in May 2018, John was a General Partner at Lightspeed Venture Partners, where he invested in several successful companies including Nimble Storage, DataStax, AppDynamics (acq: Cisco), Mulesoft (IPO; acq: Salesforce) Heptio (acq: VMware) and Nicira (acq: VMware).
Davis Baer: What’s your background, and what are you working on?
John Vrionis: People often ask me how I ended up in Silicon Valley as the founder of Unusual Ventures. Here’s the short version: I grew up in a semi-rural town in Georgia and my dad was diagnosed with Multiple Sclerosis when I was just a kid. It was tough for the entire family, especially my mom, who was overwhelmed by an angry teenager (me) and the lower middle class economic situation we found ourselves in. Convinced relieving financial stress was the biggest obstacle to happiness, I was determined to make something of my life. I poured myself into sports and school, and found both academic and athletic success. These successes ultimately opened the doors to college, where I played on the soccer team at Harvard and later, professionally. It’s important to note here that I didn’t find early success because I had a transcendent “gift” for sports or academics. It was mostly persistence and a relentless drive to overcome any obstacles which did it. In other words, I made it my mission to work as hard as I possibly could because this strategy produced some early positive results, and if I’m honest, it also numbed me from the sadness I felt about my dad’s illness and the impact MS had on my family.
After a few years playing professional soccer, I had to get a “real” job. I just wasn’t good enough to make a career out of the sport. I spent a year working for an investment bank, in part because it paid well, but I had zero control over the work that I did and quickly became miserable. I decided to go back to school for a Masters in computer science and worked for a corporate tech VC at the same time. Soon, however, I realized I knew nothing about business, so I tried going back to school again — business school this time. However, I didn’t get accepted to the school I wanted to attend (Stanford) and ended up joining a startup.
The startup turned out to be a success and eventually I landed at Stanford’s Graduate School of Business (they accepted me the second time — persistence, remember?), and then, my path took me to Lightspeed Venture Partners. I figured I would spend a year or two learning about venture capital from the inside and the emerging technologies building up around them. Instead, I fell in love with helping entrepreneurs achieve their goals in business and life, and remained there for 12 years. I learned the hard way that happiness has very little to do with personal finances, and that for me, joy comes from helping others in the hardest moments, working side by side with people who have similar values, and focusing on work I am most passionate about — i.e. early-stage entrepreneurship.
Today, I’m part of team focused on redefining the early-stage VC market and giving founders a distinct advantage through Unusual Ventures, the seed-stage venture fund I launched with Jyoti Bansal last year. It’s been a remarkable journey so far — from recruiting the team and our non-profit LPs, to launching the firm and our Get Ahead Platform in May, to the Unusual Academy in August, and — most recently — bringing on Andy Johns, one of the smartest and most experienced growth and product experts in tech, to lead our Consumer practice as Partner in January.
What types of companies do you invest in?
We’re early-stage investors, which means that investment decisions center mostly on alignment with founders and their vision for a new product and category. When we invest, the exact path of how the company will proceed in terms of product strategy and go-to-market plans isn’t clear, but we have a shared belief in the opportunity and a passion to work closely together to chart the best course. We focus on companies that are in the enterprise and consumer technology sectors. Now that technology has become a strategic part of every industry, there are far more interesting and promising markets for tech startups than ever before, which means we’re seeing exciting pitches from all different types of industries.
Today, our portfolio companies span enterprise software and infrastructure, DevOps tools and services, full-stack application solutions, fintech solutions, cybersecurity solutions, and now, with the addition of Andy Johns to the team, consumer applications. The shared DNA is the founders — we work with authentic, insightful, and determined founders who want to win big and have the humility to understand it takes a team to execute on the vision.
What do you look for when making an investment?
At the seed-stage, we are looking for people with proprietary insight — meaning they have experienced some personal pain, identified the root cause, sought out a solution, and hacked one together themselves because it mattered deeply to them. Mind you, founders with this type of origin story don’t always go on to create successful companies, but just about every breakout company that has ever existed starts from this basic premise.
We are not interested in people who start a company with the primary goal of making money. That said, let me be clear — we are venture capitalists, so obviously money matters to us and it is our job to create outsized investment returns. But money can’t be the primary driver for a founder. We’ve seen that before and we know it doesn’t work. Passion, drive, and personal experience — that’s what we want in founders. So, we work with people who would pursue their idea with or without money because it matters that much to them.
The other big traits we look for in founders are curiosity, the capability to learn quickly, and storytelling ability. On the first two, we want to see an insatiable willingness and desire to dive in and absorb new things. We also look for an unusual combination of confidence and humility. Essentially, we want founders that believe they have what it takes to beat all the odds, but have a hunger to learn something from people who have been on a similar journey at an earlier point in time.
Third is storytelling — the reality is to be a great founder, you have to be a good storyteller. There are plenty of people out there with great ideas, but the ones who truly set themselves apart are those with the best stories to communicate and inspire others to believe in what they are creating. Stories are powerful because they go right to the very core of human nature. Founders with exceptional storytelling ability can hire better talent, land more customers, and can always find people to invest in them and their idea.
What’s your advice for entrepreneurs looking to get funded?
Find investors who specialize in investing in companies at your stage. For example, when raising Seed or Series A capital, beware of investors who describe themselves as “stage-agnostic.” That’s more or less another way of saying, “We can give you money, but what we are really doing is buying optionality, so in the case where you succeed, we can write you a big check and then we can afford to spend time with you.” With billions of dollars to deploy, these large funds simply can’t dedicate the time or provide the specialized support an early-stage company needs. Worse yet, if you do take their money and they don’t sign on to lead your next funding round, it sends a clear signal to every other investor in the market that your business is not worth their time. Investors love to tell founders to “focus” and yet, ironically, many are trying to claim they are world class at investing at every stage. At Unusual, we think founders deserve better.
The best investors can make a profound difference in helping founders turn an early insight into a real business. That’s because they have 10,000+ hours of experience working through the unavoidable challenges entrepreneurs face in the early stages of their company, such as finding early customers and building a repeatable sales process, articulating the value proposition and messaging, recruiting top talent, fundraising, and the list goes on. Ultimately, it’s a matter of information asymmetry. Great investors have seen it all dozens, if not hundreds, of times before. It’s NOT to say that investors should be prescriptive — they definitely should not be because every founder’s journey is different. However, all of those experiences give good investors an advantage in terms of knowledge, and it means they have likely amassed a deep network of resources and support from which they can draw.
What are the biggest challenges / obstacles that you see founders facing that they must overcome?
It’s a long list, but if I have to choose, I’d say it’s team and focus.
Team always comes first. That’s because hiring a great team at the seed-stage is both exceptionally challenging and exceptionally critical to the success of your business. In fact, for many investors, your ability to hire great talent tells them nearly everything they need to know about your business, as I recently explained in a Hacker Noon article with my advice for early-stage hiring.
From a business execution standpoint, focus is where almost everyone screws up today. To raise money, founders have to present a BIG vision and plan, but the story told to investors is not the one customers care about, nor does it lead to a feasible go-to-market strategy. Too many founders make the mistake of trying to tackle too much with product and go-to-market plan 1.0. As a result, they end up selling a platform vs a specific solution tied to a bite-sized problem. Not wanting to give up on the grand vision, but lacking the resources to deliver a best in class solution for more than one use case, many startups run out of money before hitting the essential early milestone of evangelical customers. Early success in a startup isn’t physics hard, it is dieting hard. Having the discipline to not build and market certain things — that is the hardest part.
If you weren’t an investor, what would you be doing?
For me, meaningful relationships are what matter most in life. Helping people achieve their goals in business and/or life is the most fulfilling thing that anyone can do. It turns out I have a passion to help entrepreneurs build businesses, and a belief that the venture capital industry needs to continue to innovate and improve on many dimensions — so that’s my part to play.
In other words, there is truly nothing else I’d rather be doing. In fact, that’s why I partnered with Jyoti to launch Unusual Ventures in the first place, where the goal isn’t simply investing in companies to make money. We’ve created Unusual to redefine seed-stage venture capital, improve the model, and provide an unprecedented level of service and support to early-stage founders. We were in the fortunate position to design everything about Unusual as the first principals and we decided to push the boundaries on several dimensions. For instance, instead of raising funds from the usual suspects — sovereign wealth funds, wealthy individuals with family offices, and so on — we work almost exclusively with “unusual” LPs, such as historically black colleges and universities, foundations, endowments, public children’s hospitals, and other causes that are typically boxed out of the massive wealth creation that takes place in Silicon Valley.
Anything else you want to share?
Silicon Valley is awash in venture capital — much of which comes from sovereign wealth funds of questionable origins. According to an October report from The Wall Street Journal, Saudi Arabia is now the single largest source of funding for tech companies in the US.
The implications of this trend are troubling — as I wrote about in TechCrunch recently — and founders should be paying much closer attention. Why? Because they are in the best position to change it. The only way we will see greater transparency in VC is if founders take a stand and start asking for it. Otherwise, this growing problem just becomes another news cycle.