Aydin Senkut decided to quit Google in 2005, after six years as a senor manager responsible for Asia Pacific strategic partner development and account management. He wasn’t fed up. He simply didn’t need to work at Google any more. Like many of his peers at the time, the now-39-year-old became supremely wealthy almost overnight when the company went public in 2004.
Still, Senkut didn’t hit the beach (for long). Instead, he almost immediately began working again, this time on his own investment firm called Felicis Ventures. He designed his own logo and website, set up his own phones, had business cards made and set up informational interviews for himself all over the Valley, including with Sequoia’s Mike Moritz. At the heart of his questions was this: Is it possible to break into VC without first working for an established venture fund?
Because it’s a question that more entrepreneurs and executives are asking these days as the traditional VC industry shrinks, I talked with Senkut today about what his experience has been like so far, if not having worked for a venture firm has hurt him, and whether his own firm, self-funded so far, has its sights on outside investors yet.
You say Mike Moritz inspired you when you sat down with him. How?
I told him I wanted to get into the VC industry and asked how to do it, and he told me about this small company is Israel that he had turned around early on in his career. That’s when I realized investing is about much more than a big name firm; it’s the individuals within each firm who are really important.
When you’re talking about entrepreneurs or potential co-investors, it helps to have the cache that a Sequoia or Kleiner confers. But at the end of the day, they want to know that you can pick good portfolio companies.
Did you ever talk with Sequoia or another firm about joining it in some capacity?
I had a very brief conversation with one firm and basically it was obvious to me that especially for that firm, at that time, it wasn’t a good match.
Do you think that not having a traditional venture background has hampered you in some ways? What’s the good and bad of jumping right into funding companies?
Well, the advantage is that in the beginning, you can invest with no strings attached, in as many deals as you want. For me, it was an advantage because I could practice and learn what deals were working out and which weren’t and why. There’s also nothing like learning with your own money. Mistakes get engraved on your mind pretty quickly.
You’ve already had some exits, haven’t you?
Yes, I’ve invested in close to 40 deals so far and had four exits. I was one of the first investors in [semantic search engine] Powerset, which sold to Microsoft last year [for more than $100 million, after raising $14 million from investors including Founders Fund and Foundation Capital].
Another exit was [marketing services startup] VoiceStar, which sold to Marchex in 2007 [for $28 million, after raising less than $1 million, including from First Round Capital].
How much do you put to work, and have you repaid yourself yet in returns?
I typically invest in the range of between $25,000 and $100,000, though I have investments that exceed that range in aggregate over multiple rounds.
I don’t want to talk about specific return information; these haven’t been super-large Google-style deals where I got so many multiples that I made up the whole fund. But they did provide liquidity and it’s been very rewarding for me to generate four exits in the last 18 months.
Also, a quarter of my investments include co-investors like Sequoia, Accel, and Greylock, in companies like [personal finance site] Mint. I’m not saying that Mint is a guaranteed home run, but it’s a company that’s doing really well out there, and again, I haven’t been [investing for a terribly long time].
For other folks considering doing what you’ve done, what are first steps — aside from having the money to lose?
Well, when I started, I didn’t have any network outside Google. What helped me was I basically tried to get into deals with people I respected, like [angel] Ron Conway and [Stanford professor and angel] Rajeev Motwani. Getting into deals with them allowed me not to stress about deal terms and stuff; I knew there weren’t a lot of things that I had to watch my back. And by reviewing those deals with lawyers, I learned what worked and what didn’t.
To be honest with you, one of my exits was a convertible note and there was a certain provision that if that wasn’t there, I wouldn’t have made any money. And maybe I would have learned that at a firm or maybe in a VC class at Stanford’s business school, but investing in good people, and having good attorneys, has also been very effective.
But don’t you ever get stuck? Who do you call when you don’t know what you’re doing?
Well, if it’s anything technical, for example, I like to speak with Georges [Harik, another ex-Googler and angel investor]. I really trust his technical judgment. And I’ve turned to Rajeev Motwani. Also, if you don’t have partners, like at a traditional firm, your co-investors become your virtual partners, so I can turn to First Round and Sequoia and Accel for help, or other angels that I’ve co-invested alongside, like Josh Felser. In all these cases, I can turn for help not only to validate an idea but also to ensure that a company passes the merit of a bunch of high bars and not just my own.
Not last, now that I’ve funded 40 or so companies, I can ask their teams about a certain domain. It’s a great advantage to be able to pick up the phone and ask: “do you think X is an up-and-coming area?” or “is Y something you’re going to go after yourselves?”
What’s next? Would you consider joining a venture fund, or is your next move to put more structure around what you do and raise institutional money?
Well, first, I know a lot of smart people who’ve gone straight to venture funds, like Andrew Braccia at Accel [and formerly at Yahoo], James Slavet at Greylock [and formerly at Yahoo], and Satish Dharmaraj [founder of Zimbra and most recently a Yahoo exec], who just went over to Redpoint Ventures. And they enjoy definite advantages, in terms of the access they have, the reputation of their firms, and having a great pot from which to invest. But the challenge with venture firms is you still have to make your name in that firm and sell your investment ideas to other investment partners.
I wouldn’t say never, because I’ve worked with these other firms and greatly respect their practices and people. But with the exception of a very few, I think the right path for me is to continue on my route and build Felicis slowly myself. That’s exactly what Josh Kopelman [an entrepreneur turned founder of First Round Capital] did, and Mike Maples [entrepreneur turned founder of Maples Investments] did.
And they ultimately turned to outside investors, including institutions, to raise bigger funds. Is that where you are now? Are you meeting with LPs?
That might happen at some point, but right now, no.FUNDRAISERS: Don't miss PartnerConnect East 2018 on March 19-21 in Boston, with more than 150 speakers, 200 LPs and 300 fund managers, bankers and lenders. CLICK FOR DETAILS!