Interview with a Silicon Valley Investor, Kevin Reddy
After your brilliant idea turned into an original application, what are your next steps? Startups are often confused about this question, and that’s why we decided to talk to a startup investor and CEO advisor from the Silicon Valley, Kevin Reddy, and ask him for advice.
During our interview, we discussed where and how startups search for investors, how they attract their attention and what common mistakes they make. Now, we are about to share with you valuable first-hand information that you won’t get anywhere else. Enjoy!
Get Acquainted with Kevin
Kevin is a successful Startup Investor and CEO Advisor along with a decorated management consulting career as a senior executive at top-tier strategy consulting firms like Accenture and Booz & Co.
Currently Kevin invests in and mentors passionate, committed, visionary, creative, synergistic entrepreneurs becoming better leaders in creating innovative teams and relevant disruptive products as foundation to building game changing companies catalyzing the paradigm shift in the areas of Symbiotic Cognitive Computing, AI, VR, AR, CyberSecurity, FinTech and other spheres. Kevin actively takes part in the development of tech world, speaking at numerous innovative conferences, where he shares his rich experience of entrepreneurship, startup funding and market opportunities.
Kevin Reddy is a digital innovation, strategy, and transformation journey advisory executive with senior executive level experience at top-tier global strategy firms like Accenture and Booz & Co.
Now, it’s time to read what Kevin shared with us in an exclusive interview.
Let’s Talk Business
- What was your career path to become a tech startup investor?
I majored in Mechanical Engineering during Bachelor’s degree, because I like building things and then chose Computer Science for Master’s Degree, because of the endless possibilities it offered in creating digital products out of quantum space. My father is a professor in Electrical Engineering with a PhD. and my sister is a Research Director with a PhD in Bio-Tech, but I’m more business-minded with analytical skills, so I started my career by joining top-tier management consulting firms like Accenture and Booz & co where I had a successful consulting career as a senior executive and then a successful entrepreneur career in Silicon Valley as the founder and CEO of Security Software Company which led to becoming a tech investor in Silicon Valley (SF) and Silicon Beach (LA) along with few deals from startup eco-systems around the world.
- How do you keep up with the trends?
As for trends, I believe in Artificial Intelligence and Augmented Reality along with Security because I saw how these spaces can transform human life experience. I’ve always thought there’s so much that needs to be done in tech innovation in these areas so I keep in touch with various though streams for other industry thought leaders and new innovations from research institutions, and even today there are no 100% secure systems. As a management and strategy consultant at Accenture, I leveraged both business and technology innovation to solve complex high-value challenges.
- What are the areas of your investments?
After selling my company, I was investing in different tech startups. Investing in startups is like investing in the stock market. If you don’t know the sector, don’t invest. It’s my investment thesis. I invest only in the areas I have deep knowledge about. So, I don’t gamble with these investments, basically. As there are so many investment areas, I decided to pick a few and go deep into them, and chose AR, VR, AI/ML, and IoT. Of course, out of curiosity, I follow a few other areas, and I stay on top of those things reading various articles and research papers.
- What happens if you find something very interesting from a different area? Will you try to ignore it?
No, if something else comes in, I’ll pick it up as long as I have enough time. For example, let’s take drones. They have so many use cases, for instance Agritech. Here in Ukraine number one and number two leading agriculture holding companies through an investment banking firm approached me for some advice. Drones can be potentially applied in many areas and can actually save lives in hazardous locations, so this area is particularly interesting for me because it can make a positive impact.
- Where do you search for the startups?
I get a lot of deals through my friends network, also from professional angel syndicate and the informal angel networks. Also, when I speak to different startup events, and when everyone knows you, they send you investor pitch decks. I get pitch decks through LinkedIn as well. I get more than I need at this time.
- What makes a good project that is attractive for investors?
First of all, there has to be a brilliantly intelligent founders and a great team solving pain points in a large market with unique differentiators. In addition to that for me, it should be fun to work with them. Startups with innovative solutions with focus on a large total addressable market (TAM) and ability to scale will be attractive.
- How should a startup present itself to an investor to draw their attention?
When I want to get more information about a startup, I send them a template for an investor pitch deck. When they send it back to me, I review the information. Typically, I won’t look at the project unless there’s a functioning MVP with some traction. Otherwise, there need to be rockstar founders with proven track record with an MVP, who achieved something impressive in their careers.
Also some of the indicators are, when I get the first email from a startup, I observe the way they write and the way they approach me, by which I can tell whether they are sharp and smart or not. If I don’t like the first email I receive, I won’t take things to the next level most of the time.
- If a startup reaches out to you with an MVP, what should it be to get your attention and why?
A minimum viable product should have enough functionality to get decent meaningful traction. The MVP should be able to gain traction with the features it already has, and it even can be one feature, just like in Snapchat with its core feature of disappearing messages and can be as simple as that. And yet it got so much traction. So, I look for something that has unique features to make a high impact and be scalable in a large market.
- What do investors look for in a project before they invest in it?
Typically, there are two things. First of all, the founders should have built a company in the past and sold it. In this case, they can come to an investor with just a small prototype or even with just an idea. Their past experience will serve as a proof that they can build a company and sell it. But, if they never built and sold a company before, they should prove that they can build a product and sell it. They need to be able to show at least a little bit of growing traction of their product. They need to prove to an investor that they can execute. If they show it and investors know that the product targets at a great and fast-growing space, we’ll invest in the team and the given space.
- Please name top 5 things investors look for before investing?
- A team is everything. People matter most
- An MVP with traction
- Large total addressable market (TAM)
- Relevant area (the investor needs to know the space. The project has to align with the investment criteria. For example, if my areas of investment are AI, VR and AR, if someone approaches me with an idea for a medical device, I will definitely not invest into it).
- Flexibility. The team has to be coachable and flexible
- How do you track the progress of the projects you are investing into?
Typically, when I invest, I’m on the advisory board. As I don’t have much time because of my traveling, I usually take between one and two one-hour calls per month. People generally send me one email per week as needed, but not more. Usually the teams prepare their questions before the call and we decide things during those calls. Most of the teams I work with, have smart founders and they just ask for high-level direction and strategy in all areas of the startup.
To keep track of what’s happening to my investments, I don’t invest in more than five companies per year. That’s my max. This way, I have five calls per month. Sometimes it happens that I have to take over the CEO role. Usually, it happens when things go wrong. I don’t mind being a CEO, but it’s generally only for a couple of months before I find a new CEO. I wouldn’t like to be a CEO on a full-time basis, though, unless it’s my own company based on my dreams and passion.
- What are the greatest mistakes of the startups who failed to get investment?
If a startup has everything well done and aligned, but there are gaps, I tell them to go and work on the gaps, and come back to me when they are ready. For example, one guy from the US came to me, and he’s from San Diego where I’m from, and we have many common friends and so on. He works on a project that addresses a very niche space, and he has already put together a team of 8 people who are working on the project for free. He wanted me to be on the advisory committee. They have a great vision, but their project is too early and is no MVP yet. So, I told him to build at least some part of MVP, a lean MVP that works to support their vision. It’s been like three months and a half, and he sent me an email that he is ready now, so I’ll take another meeting from him.
A typical mistake people make, especially startups outside the US, is that they ask the investors to sign NDAs. I don’t sign NDAs because there are so many projects investors get to look at the same time and we cannot be liable for anything here. Nobody in the serious investor world signs NDAs. I generally won’t even answer to such requests. Such simple things turn off investors sometimes.
Some people send me an email and follow up the next day. Being too pushy is not a good thing as well, as I think they should wait 3-4 days before they follow-up. Everyone’s busy, and I’m also traveling, so being too impatient definitely doesn’t do any good.
I prefer referrals through my friends network, so it’s better for a startup to approach me through someone that I know. I think that when a startup sends a direct email, it should be no longer than three paragraphs. Sometimes the startups are so excited about their project that they want to tell everything about it in the first email, and it usually looks overwhelming. My advice here is not to overload the investor in the first email. It’s better to write a good opening that will generate interest and boost further communication.
- How can a startup estimate the sum of money to ask from investors?
Typically, there are gradual stages of investment. There is a pre-seed stage, seed stage, early stage, liquidity and the IPO. Typically, I’m investing in the seed stage right now. In the seed stage, a startup can calculate how much it costs to accomplish what they got at the moment, that is a working MVP, and estimate what it will take them to develop a fully-functional first version of the product and need to build strong sales and marketing team to get more traction, which will drive the size of required investment. They have to put together a high level financial model and estimate how much money they will need for further development of their product, for salaries, marketing and so on, and they will see how much they will spend per month which we call it the burn rate. For example, in Ukraine, it is somewhere about 10-15k per month. If a startup asks for too much, they will be asked whether they are doing something different than others do and everything will be reviewed. The questions will come up.
- What’s your advice to startups trying to find funds for their projects?
My advice is basically one:
Create a startup that you are passionate about, make an MVP with some meaningful traction, and come to the investors who invest in the space your product is aimed for. That's it.
We sincerely hope that you found the answers you were looking for in this interview. Also, we believe that together with Kevin we managed to inspire you to work hard on your dream project and that we equipped you with the insider’s knowledge needed for making it in the investor world. Good luck with your app and, as the song goes, may your limits be unknown!