The Inquisitive VC: Vignesh Kumar — Global From Day One (GD1)
Vignesh Kumar is a Venture Partner at Global From Day One, a New Zealand venture capital firm. Vignesh is an active angel investor and is the founder of Journey Health, a company focussed on creating a better cancer patient experience. Previously Vignesh worked for Apple as one of there lead Global Supply Managers.
We talk about his journey to working at Apple and then back to NZ, angel investing, sitting on boards, how NZ startups differ from US startups and more!
NA: The first thing I want to talk to you about is your journey, from school through to university. I know you worked at Fisher & Paykel Healthcare, and essentially that journey from here to Apple and then back to New Zealand, again, doing what you’re doing now.
VK: I think to start and preface all of this:
I am an engineer first and foremost, and that’s my professional qualification, biomedical engineering. I think it’s that basis in engineering, which kind of gave me an interest in tech. Whether it’s working for a medical device company, whether it’s doing angel investments, whether it’s doing venture capital investments, whether it’s doing my own startup, it’s that basis of engineering that’s key.
Anyway, to recap I was born and raised in Papua New Guinea, and then moved to New Zealand, when I was 12. As I mentioned, I did undergrad engineering at the University of Auckland, in Biomedical Engineering, and during the degree itself got hoovered up into Fisher & Paykel Healthcare (FPH) to work on medtech.
At FPH I was a product development engineer, and in this role, I was exposed to all aspects of design, from industrial design concepts to manufacturing design and execution. I learnt a lot there, but for me, the frustration really was that I felt like it was just operating in an industry where nothing exciting was happening and you’d work on a product for maybe two, three years, and that product wouldn’t see the light of day for another two years. The development cycle was just painfully long, though things are mercifully different now.
Within FPH I was working on neonatal resuscitation, helping create devices that resuscitate premature babies. This was a very niche part of the market, with a very traumatic user base experience, but while working in that space was immensely rewarding, it was also kind of frustrating because I never got to really see rapid product development really address the customer need here. It was very much just sustained development over a long period of time.
I left FPH mainly with that frustration and then went on to get my MBA in the States. Thankfully that was facilitated by a New Zealand-US joint Fulbright scholarship.
My experience in the States was a whole new kettle of fish. At business school in the US, that’s when I really got exposed to the world outside of NZ, and how it operates. I had never really worked in a meaningful way outside of New Zealand and Oceania until then and I had classmates coming from all the big tech companies such as Google, Amazon, Apple, Facebook, and this is still when some of those companies were relatively young.
It was that experience, which made me go, you know what, I’ve done medical devices and health tech, I want to do consumer devices. That’s when I consciously put my hand up to try and work at a tech company.
I’m a very open person about this, but I’ve been an Apple fanboy since forever, and my one and only internship application during my business school program was to work at Apple, as an MBA intern. Thankfully my application rate was a hundred per cent. One out of one and I got the opportunity to go and work at Apple and that kind of changed my life dramatically from that point, seeing how a company like that got to where it is, learning from them and the insane learning curve that they have to get stuff done and always developing stuff with the consumer experience in mind.
When you worked for companies in medical devices, at least back then in the early 2000s, it’s probably different now, you focused more on the clinical value, and you focused more on the utility to the healthcare process, rather than the patient’s potential comfort. Even though you’re helping them on their outcome of surviving, comfort ranked low and usability ranked low. Contrast that to consumer tech, where usability and comfort are crucial. That was the paradigm shift that I kind of had there, and what really put me on the consumer tech track, then after a few years at Apple, I decided to call it quits and come back home to New Zealand.
In New Zealand, I continued a little bit of what I was doing at Apple, which was scoping out early technologies, specifically things anchored in deep science and engineering, and incorporating them into the product execution process. It’s that kind of science anchored innovation for engineering and manufacturing that I was familiar with and that kind of bent and angle that I used when I came back to New Zealand and I started angel investing in the ecosystem here.
NA: Great summary and love your journey. You started angel investing when you got back here, what do you look for in companies you want to invest in?
VK: What I look for in startups when I invest, the answer depends really on when you’d asked me this question, if you’d asked me when I just moved back and got into it, I would have just said cool stuff, that had a hardware slant to it, with a motivated team or founder, that was really it. I think anyone who tells you otherwise when they start out angel investing is maybe being a bit disingenuous because your investment thesis certainly modifies and coalesces into something more insightful overtime after your first few investments.
You don’t start out knowing or having a hyper-focused interest in a particular area, you kind of again stumble into it and for me, I knew I had hardware experience, I knew I had engineering experience, and I wanted to work on stuff that resonated with me. That categorically meant not touching B2B SaaS, not touching SaaS in general, not touching direct to consumer software. I was a hardware guy and that was great because it gave me even further depth and insight into pots of deep tech, like frontier tech with a space focus.
Admittedly, I haven’t had the courage or conviction to invest in any space technology startups. I looked at a few, but maybe one day we’ll see. I think ultimately for me it was focusing on a hardware niche, understanding it even better, making a few investments across the space there and then once I’d gotten confident there, I kind of branched back out into the wider focus areas of looking at how can I take the learnings that I’ve got from investing in hardware startups and apply them to software startups or potentially software plus hardware-enabled startups.
For me, a lot of it is kind of cliche but now when you ask me the question my answer is somewhat routine for angel investment: an interesting idea is a given, the passion of the founders and a lot of it truly is if they’ve already got something in the market, or see a gap, I don’t have to know a lot about the founder. I don’t necessarily have to feel especially positive about the product, but if product-market fit is there already or if it’s painfully obvious it’s incoming, then that’s the biggest validator.
If they’re super early, then it’s more just focusing on the founder and their passion for what they’re doing, because I am an early-stage investor. For me, it’s the seed and Pre-A space and a lot of that is not even having a product. It’s the founder’s passion and kind of seeing their interest, back story, and ability and longevity to stick it out to the future rounds of what they’re building.
NA: As an angel, what kind of due diligence do you do personally on these companies?
VK: This has evolved over time, the very short answer is that I have taken it upon myself to try and do as much homework as I can because that’s the best learning. In my due diligence, I try to do it by emulating others.
Even when you read the numerous VC blogs, yours included, you’d get a good indication of how they’re doing their DD. A lot of it for me was, okay I’ll talk to the potential customer. If they have a product, I’ll ask them what their best interactions are, their worst interactions are and what they’d love to have. Then you kind of relay that with the founder and ask, “Hey, how do these things correlate with what you’re building,” and you get their take on it.
If there’s no product in the market, for me, the DD was then more about just talking to people who had worked with them and could say that xyz doesn’t have a history of just starting stuff and leaving it unfinished because that’s really what you’re looking to avoid at the seed stage.
I don’t really mind if you have multiple projects going on, but what I do mind is if those multiple projects have just kind of all dead-ended after a long meandering incubation period with no real realization, and no conscious decision to either progress one or stop the others. It’s diligence, around the founding team, their ethos, because, without a product in the market, DD is a bit harder there.
You’re trading off a lot of the proper diligence on the product, the market, the strategy, the sales, for qualitative “this might be good” feelings based on triaging the founder and the initial vision and team.
NA: That makes sense. You mentioned to me earlier, you’ve previously made an investment in a US startup. Could you talk around some core differences you may have noticed in New Zealand startups and US startups?
VK: The key difference between US startups and this is very blatantly clear to me now, is that US startups are a lot loftier in their ambitions.
It’s just a given. They are incepted with the notion of changing the world versus New Zealand startups are incepted with the notion of like marginally improving your workflow here and there. You have to really encourage some teams to realize that there is a bigger opportunity when you think about it more audaciously.
In some part, I think it probably stems back to the fact that as a society in NZ we have the whole tall poppy syndrome thing where we try to bring folks down a bit, especially those who are overachieving and grandstanding in our eyes, and so when you are starting out on your startup journey you tend to self-limit because of this. It’s sort of a perpetuating cycle where you don’t want to be perceived as a tall poppy by being audacious or punching above your weight. That’s the main difference I see.
Then the second aspect, a difference I see is that US startups raise a lot of money and they create a certain level of output. Kiwi startups by comparison raise a lot less venture capital and probably do just about the same amount of output.
They don’t realize that they’re actually utilizing that dollar a bit more efficiently than their US counterparts. That’s one thing I can tell you for sure, a dollar here goes a lot further than a dollar in the States and there the amount of times you would just see capital go into something, like topline marketing spend, and be burned, versus here where people are truly hesitant to utilize and deploy capital for truly value add activities.
I’m on board meetings with companies which have bank balances of $2-$3 million and this is from receivables alone for our product and they’re hesitant to spend another $10-$15,000 per month for something which will clearly add value. You have to tell them this is nothing in your gross burn perspective.
Let’s really focus on trying to supercharge capturing the market versus kind of being really worried about how you’re spending nominal sums of money, but that’s not to say you should be reckless with spending. I definitely do see that Kiwi founders are a bit more closely guarded with their finances, they make it work harder, but they don’t realize it.
NA: Do you think that’s because they fear the struggle of raising money at later rounds being based in New Zealand?
VK: Yup. You’ve pretty much hit the nail on the head there from my perspective, which is that follow on capital has been inherently hard to raise in New Zealand in the past and because of that, we get the self-perpetuating cycle of startups raising smaller amounts doing as much as they humanly possibly can and worrying that they will die before raising their next tranche of capital.
It’s kind of this perpetuating post-traumatic stress disorder of, I have to raise capital, I have to conserve capital, I can’t spend it, versus, obviously in the US, you can have a seed idea or pre-seed idea, raising millions of dollars on like a safe note, versus here you may be given at best a hundred thousand or so.
It’s very much PTSD with capital raising again, because of the capital constraints. But that being said, I think it’s changing in New Zealand. I was already seeing a trend in the last three years in New Zealand where a lot of foreign players, a lot of Aussie VCs, a lot of US VCs and are now doing deals here.
You only have to look at the likes of, obvious ones, Rocket Lab, Halter, Foundry Lab to name a few. You’re talking about companies which are just getting picked off discreetly, even Narrative, in their last round had US funds come in. You’re just getting US VCs to see this as a cheaper place to get deals, but because of that, the capital’s becoming more efficiently deployed, and startups are starting to realize that they can try and raise more widely and break what I call the PTSD cycle.
NA: You mentioned that you’re a board member on a few startup boards. Could you maybe talk about a few challenges you faced being a board member and what’s the difficult part of being a board member?
VK: That’s a great question. I think again, in two parts, the difficult part of being a board member when it’s your first board versus the difficult part of being a board member when you’ve done it a few times. From the perspective of your first board, I’ll be really honest, with my experience abroad and everything, I’d never been on a board.
The first time at a board meeting, when you are the investor director or similar it can be daunting. You may not have found your voice. You may not know how to operate. You don’t know what you don’t know, and you’re there worrying that the input and commentary you provide may not be useful.
Sometimes it’s a really humbling experience. To give you an example, one board that I’m on, Formus Labs, Ju the founder, Dr Ju Zhang, he’s a senior of mine from the Auckland Bioengineering Institute and he’s someone that I looked up to during my studies. Much later in life, I was on his board and for me, that was a very unsettling experience at first because deep down I felt that I couldn’t question his authority or I couldn’t provide context or learning for that person.
But then you quickly realize that it goes both ways, and I think someone like Ju is very humble and down to earth. The first thing he told me was he was really excited to have someone young with experience from outside New Zealand on his board.
It’s the fact that someone was receptive about that and totally put aside that he knew that I was his junior at university 13–14 odd years ago and he fully looked at me for the summation of my experiences, which made me go, yeah, I’m comfortable to give commentary, feedback and be a sounding board and touch wood, I’m excited to say that that relationship has flourished really well to the point that I’m now the Chair of that board. Ju and I, we get on like a house on fire and we are literally just doing our best to conquer the world for Formus Labs. That’s the best board type experience.
Then once you’ve done it and you kind of get on to a few boards and you realize you can add value, it definitely becomes a lot easier. It just comes down to being confident in what you have to say. I learnt this working in Silicon Valley, where a lot of people have a lot of things to say, and you should not add to the noise.
That’s the mantra I espouse and with all of this stuff at the board level, especially as someone who’s not grey-haired, you just have to be comfortable in knowing what you know, and when you don’t know something, you be very transparent about it, but, just being confident in the experience you bring, and being able to be an ally and supporter for the company is what matters because that’s what you are at the end of the day. It’s being a big ally and you’re there to be that ultimate sounding board when things are going bad, you are the sounding board when things are going great, you are the sounding board, you have to get used to both scenarios.
NA: That’s a great example. You’re joining Global From Day One (GD1) as a partner, could you talk about the firm’s thesis and what is the thesis of the new fund that you’re trying to raise?
VK: I will be joining Global From Day One (GD1), which is one of New Zealand’s largest Series A focussed venture capital funds. Although understated, we have admittedly been quiet operators in the past, but we’re looking to change that now going forward. With fund 3, we are looking to expand our investment thesis, from entirely B2B SaaS to a lot more deep tech, healthcare, hardware, which is my domain and where the expertise I bring in helps yield value. The other senior leaders at the fund, Chintaka Ranatunga and John Kells, they have a wealth and depth of experience in B2B SaaS, marketplaces, and high growth startups both here and abroad. With my involvement, we’re hoping to expand that thesis into health tech, deep tech, hardware.
When I joined as a venture partner for fund two, we were able to make investments into some of those areas as a kind of early start and that was in StretchSense, and in UBCO. Both very interesting, deep tech hardware technologies.
We’re excited about the opportunities that’ll be coming in the next little while. Aside from that with GD1, I think at the end of the day, we are a smaller, more tight-knit fund and we’re not an overly bloated or heavy management team.
We are super hands-on with our involvement with portfolio companies. I think a lot of investors actually give you the lip service that they’re operationally hands-on and that they have eight operating partners, four venture partners, doing all this kind of stuff.
They may fly in for one hour, fly out for an hour but at GD1 it really is a herculean effort 24/7. Time is spent in excessive amounts, ensuring that we are essentially zero cost employees of our portfolio companies, helping them achieve stuff crazy fast. One example I can give you is, StretchSense, when we invested in them, they had just come out of a difficult period.
Going through a down round, repivoting their product strategy they instantly hit product-market fit. It was just the most amazing feeling to see a struggling dejected team who have groundbreaking technology, come down this steep downward spiral, calm down a bit and then level set, have GD1 jump in, help them find and pivot to a new market and then just ignite in that new market and ride the curve back up.
But in doing that, you can imagine if you’re going from a large organization to a small organization, and then you have suddenly got insane market traction you’re now having expansion problems again. In this case, with my experience in operations and product scaling, I embedded myself into StretchSense to ensure that their production and operations processes were somewhat robust and that I was literally managing their engineering operations teams, and I still am, to unplug production issues and plan for production lead time operation issues that will occur as we hit these revenue milestones and output targets.
This level of involvement is more than your typical VC and, I say that both as a badge of honour, and also from a truly tiring perspective because it’s tiring, but we’re proud of it because we do that literally on a daily basis with the goal of helping our teams succeed.
I think it’s really important to realize, yup, there are a few VCs around, but there are very few who are actually going above and beyond like us who are actually embedded doing the hard yards, trying to ensure that we have de-risked your approach to the next capital raise and value inflection points.
NA: I want to talk about a few of the areas that really excite you right now. I know you said, you started off as a hardware investor or hardware focus, and now you’re expanding that. What are some of those really interesting areas that are exciting you right now, that you will be able to see, deal flow in New Zealand?
VK: For me two exciting main areas really are, digital health tech, and then on the other side, it’s kind of the hardware as a service stuff, and hardware as a service is really just a re-energization of a tired investment vertical. Just like how people used to have statistics and now they have machine learning, hardware as a service is just pretty much reenergizing interest into hardware investment, especially on a cost recurring basis.
I’m really interested to see companies that are realizing that they can do hardware as a lease, hardware as a subscription, whether its B2B or B2C. You look at the likes of Peloton, which is a consumer exercise device and Reddit Wallstreet bets meme stock. I’ll be the first to say, as a hardware guy, I was very disparaging of what they were trying to do and doubtful that they would get the traction that they did.
Yes, COVID has helped them, but it speaks to the mindset that we have now as consumers versus the mindset that consumers had maybe five years ago, which is, this kind of spending commoditization, recurring expenses, it transcends software and is entirely applicable to cost heavy hardware consumer products across all facets of our lives. Then on the healthcare side, it’s more to do with the fact that I’ve always been a healthcare proponent, even before it was cool.
Now, because of COVID, it’s really interesting to see private insurers and even public insurers in the US start to create rules and easing legislation around reimbursement, risk sharing, making it easy for healthcare providers to use these technologies, making it easy for medical device companies, especially startup medical device companies to go through the FDA approval process, to get clarification on their risk profiles faster.
Healthcare and personal healthcare, when I dive a bit deeper, it’s all going to come down to treating the consumer, treating the healthcare patient as a consumer, and making sure they enjoy the experience because right now I think we’re probably seeing all of the clinical decision assist tools and that’s great, but there’s so much untapped patient-facing value.
It’s definitely great, but people are still missing a trick. The patient is the consumer and we should definitely be focussed more on design thinking around how can the patient have a more meaningfully robust, clear experience going through treatment? and any technologies which kind of address the patient side of the experience in a truly meaningful way, they really interest me.
For me, that’s the interesting stuff and obviously, an extra kind of bonus area for me is, Nawaz, you’ll probably appreciate this, starting to learn more about stuff like DeFi and lose my ignorance and preconceived notions about what DeFi is and isn’t, because like everyone, I think I’m starting to realize the more I get involved in this ecosystem I know what I know, and I don’t know what I don’t know. I want to remove ignorance rather than kind of just cement over it. I’m trying to spend a bit more time reading up on stuff like DeFi, understanding how it can be used, and its utility.
NA: I’m excited that you’re actually looking into that. That’s super cool. Thanks so much for joining me today Vignesh!
VK: No problem. Thanks for having me!
