Author: Todd Rassiger, Senior Managing Director, First Republic Bank
As a 20-year-old undergrad at MIT, Krishna Gupta saw an opportunity to help his peers turn their ideas into sustainable technology businesses. He decided to start a venture capital firm in 2008 and worked from an unusual setting — his dorm room.
Over the past eight years, Krishna and his co-founder Neil Chheda have built their company, Romulus Capital, from a humble beginning into an early-stage venture capital firm that has backed about 35 companies to date and has over $150 million in assets under management.
We talked with Krishna and Neil about how they’ve used their youth to their advantage in building Romulus Capital, what type of companies they choose to invest in, and their advice for entrepreneurs looking to build a business in today’s economy.
“We believe in the few people at the forefront of technology and science innovation, at the forefront of where massive traditional industries are moving, and we focus on those people.”
What led you into the venture capital field and inspired you to start Romulus Capital?
Krishna: I came to MIT because I wanted to major in engineering and start a company. I didn’t have any real initiative to be a venture capitalist. A lot of my friends there had the same idea, but their business concepts typically weren’t getting off the ground, and when they did, VCs couldn’t provide any real value for them. Back then, in 2008, there was a gaping hole between angel investing and seed capital. I fell into the VC role by helping my peers figure out how to get their first customers and raise capital. An investment of $10,000 to $15,000 would make a big impact in terms of where their companies could go. I thought, “Why not solve this problem and do it in an entrepreneurial way?” So starting Romulus was an organic decision, not a premeditated one. We were at the start of the Great Recession, so raising money was difficult, but it meant we could make a bigger impact on the companies we were helping.
You both got started much younger than traditional venture capitalists. What advantages have you found your age provides when it comes to working with companies and investors?
Krishna: Every age has its benefits, but there are a few extra advantages you get when you start a VC firm at age 20. I hate the status quo and toeing the line, and in Boston’s VC community, the status quo meant working with and relying on older generations. Entrepreneurs would often make the trek out to affluent suburban areas to ask for money, which seemed dissonant to the perspective of young entrepreneurs on college campuses. So, at that time, our advantage was our optimism and how we related to founders — not just in age, but also in our way of thinking and our methodology. We initially had to overcome a lack of credibility, but because we wrote smaller checks and weren’t in too many competitive funding markets, we could better prove our value. We told entrepreneurs, “Hey, we believe in what you’re doing. Let us be part of the first round and prove our value.” And we would prove our value over the first three years.
Neil: For any VC, being young-at-heart is critical. There’s a sense of wonder, opportunity and openness in disrupting the status quo that’s tied to youth. That differentiated us. Most people we invest in are our age. Even as the firm grows, we will continue to be young-at-heart. But the experience of starting Romulus Capital when we were young has definitely helped us keep that spirit.
What challenges did you face when starting Romulus Capital, and what challenges do you face today?
Krishna: Trying to find good companies and help them succeed — these are always massive challenges. But in 2008, fundraising was very hard for me. At age 21, I had no money to seed a fund and no experience investing money in any asset class. Also, we started fundraising a month before Lehman Brothers crashed, so it was not a good time for people investing in illiquid assets. The other challenge was thinking, “Are we going to succeed?” This business is full of self-doubt, and proving that you have succeeded often takes a long time. But now, fundraising is easier: We have investors from 15 countries, including three royal families and the chairman of MIT, so we have a strong investor base that is supportive of us.
Neil: Another challenge is staying true to your DNA. When we first started, no one was doing what a small, seed-stage VC firm could do. Now, the challenge is that growing in size, simply for the sake of growing, may not necessarily be a good thing. We started with $1 million in assets under management and have grown to $150 million, so we’re similar in size to the funds we wanted to disrupt when we started. There’s both pressure to grow and, at the same time, to stay true to our DNA. So we think carefully about how we can grow, while also remaining mindful of our entrepreneurial spirit and our value proposition of helping companies grow.
What’s your philosophy for deciding on what people and companies to invest in?
Neil: In today’s world, it has become easier and faster to start companies and easier to be a venture capitalist. There’s a lot of competition, and the space is crowded, so we look for truly differentiated technology and excellent people. We believe in the few people at the forefront of science innovation and we focus on those people.
Krishna: We also like entrepreneurs who work in an industry and realize there’s a problem there that can be solved with technology, who then build a team that merges their industry knowledge with tech-savvy knowledge. We look for companies that are capitalizing on a very new scientific breakthrough or using technology to leverage a problem. We ask questions like, What is the sustainable competitive advantage? It’s hard enough to be the best at what you are today, but what about in five years? Why will this horse continue to race faster than others?
How can founders build a solid company and also create a diverse, shared perspective of ideas within their staff
Krishna: Storytelling is important. Every founder has a story and should be able to convey his or her story to others — co-founders, early employees, investors, customers, vendors and the bank — in a compelling way. Understand what you’re doing, and understand how to communicate it so that people get excited. Then, think opportunistically. Think about who would be your ideal employees, which set of companies would be ideal partners, and go after them. We do spend a lot of time storytelling on calls, convincing early potential employees or executives to come on board instead of taking a much “safer” job. And we try to share as many ideas from our own experience as possible.
Neil: Passion is a big factor.We invest in founders who are passionate about what they’re doing. Having built companies, we know that every success story has ups and downs — and the most successful ones tend to have the biggest dips. Often the most rational thing to do is quit, but if you have an irrational desire to solve a problem, you can overcome the difficulties. Success is about sheer perseverance, passion, and wanting to solve the problem. So focus on a problem you truly care about, because the founders who do that are the ones who succeed.
What advice would you give now to budding entrepreneurs?
Krishna: People who are young-at-heart have the curiosity to be always learning and the hunger to make an impact. Those doing that at age 40 or 50 aren’t much different than they were at 25. So ensure you’re passionate about what you’re doing and what fits who you are as an individual. I give the advice of “know thyself.” Understand who you are and embrace it — and understand your risk appetite. I could not handle the slower pace at a big company. I love when things are changing every day and the ability to help shape that change. But if that does not resonate with you, then you should not start a business.
Neil: Do not get discouraged by failure. Every person who has made meaningful change in the world has failed along the way. You will fail too, and sometimes in the moment it will feel like it’s the end of the world. It’s not. Success is not just about how smart you are or how good your idea is, but about perseverance and resilience. Some of the best lessons I’ve learned are the result of painful mistakes. Learn and adapt from setbacks, but never let them shake your passions.
The information in this article is presented as-is.
© First Republic Bank 2017