10: How Amit Garg co-founded an AI-first seed fund before AI took off

08/27/24 • 71 min

Armed with an educational background in computer science and biomedical informatics, Amit Garg switched to venture capital after a long, successful career in the corporate world, which included stints at companies like Google and Samsung.

And that’s just the way he never planned it.

That’s right, the almost-doctor didn’t intend to get into venture capital, and he certainly never planned on starting his own fund. He was drawn in by his innate need to build things, including relationships with people. He partnered up with his officemate from Norwest, Sanjay Rao, and the two started Tau Ventures in 2019, an AI-first, early-stage fund focused on healthcare, enterprise, and automation.

Amit tells us about his very targeted approach to investing, which is different from the “spray and pray” method we’ve seen from friends of the pod and other investors in general. We also get to hear first-hand accounts about the importance of building trust with your investing partners and your founders. Plus, Amit gives us his take on the state of healthcare and AI and why – despite all the challenges – he’s hopeful about where it’s headed.

Amit primarily invests $500K in Seed-stage healthcare, enterprise, and automation startups and occasionally in Series A, B, and C through Tau Ventures.

Highlights:

Amit turned down a spot in medical school and pivoted his original ambition to become a doctor by first joining Google, pivoting to VC, and then becoming a digital health founder.
He got into the corporate side of venture capital after business school, but he never had any interest in starting his own fund. That is until his friend and former officemate convinced him that an AI-first venture fund was a great idea in 2019.
Amit explains that the “why” behind his investing does come from a place of self-interest – which is much different than selfish. He feels that when he pursues and realizes his own self-interests, he can help others to the same.
Why a founder shut down a company in his portfolio and why Amit decided to back him again basically the next day.
How he sees the interplay between angel and institutional investors and why they’re both necessary
Amit’s frustration with healthcare and how it fuels his passion to make it better. Plus, he explains why he keeps his focus on the three legs of the healthcare tripod.
(00:00) - FIFU 11 - Amit
(02:30) - Amit’s journey into venture
(06:08) - Why Amit likes venture capital as someone who wants to make the world better
(13:01) - Memorable moments from the first conviction-driven investment: Iterative Health
(19:18) - The machine gun vs. the shotgun style of investing
(21:05) - Lessons from the worst investment
(24:34) - Be careful who you partner with, optimize for good investors
(28:22) - What the best investment with a $450M exit taught Amit
(32:57) - Investing is about humans believing in humans
(35:42) - The state of healthcare and AI today
(46:39) - Venture vs. angels in the healthcare space
(51:12) - Outcomes in the digital healthcare space are starting to behave like tradtional SAAS software outcomes
(58:13) - Lighting round
(01:01:51) - Takeaways

And that’s just the way he never planned it.

Amit primarily invests $500K in Seed-stage healthcare, enterprise, and automation startups and occasionally in Series A, B, and C through Tau Ventures.

Highlights:

Amit turned down a spot in medical school and pivoted his original ambition to become a doctor by first joining Google, pivoting to VC, and then becoming a digital health founder.
He got into the corporate side of venture capital after business school, but he never had any interest in starting his own fund. That is until his friend and former officemate convinced him that an AI-first venture fund was a great idea in 2019.
Amit explains that the “why” behind his investing does come from a place of self-interest – which is much different than selfish. He feels that when he pursues and realizes his own self-interests, he can help others to the same.
Why a founder shut down a company in his portfolio and why Amit decided to back him again basically the next day.
How he sees the interplay between angel and institutional investors and why they’re both necessary
Amit’s frustration with healthcare and how it fuels his passion to make it better. Plus, he explains why he keeps his focus on the three legs of the healthcare tripod.
(00:00) - FIFU 11 - Amit
(02:30) - Amit’s journey into venture
(06:08) - Why Amit likes venture capital as someone who wants to make the world better
(13:01) - Memorable moments from the first conviction-driven investment: Iterative Health
(19:18) - The machine gun vs. the shotgun style of investing
(21:05) - Lessons from the worst investment
(24:34) - Be careful who you partner with, optimize for good investors
(28:22) - What the best investment with a $450M exit taught Amit
(32:57) - Investing is about humans believing in humans
(35:42) - The state of healthcare and AI today
(46:39) - Venture vs. angels in the healthcare space
(51:12) - Outcomes in the digital healthcare space are starting to behave like tradtional SAAS software outcomes
(58:13) - Lighting round
(01:01:51) - Takeaways

Previous Episode

09: Angels of Shopify investing collectively and lessons on following your gut - Atlee Clark, Angel

What do you get when you mix U.S. national security, angel investing, and kids’ pajamas? Atlee Clark. Proud Canadian Atlee took a hard pivot from the public sector to the tech world, first through a nonprofit called the C100, which supports entrepreneurs, and later at Shopify, focusing on 0 - 1 initiatives. Similar to other angel collectives emerging at the time like Hashtag Angels and Operator Collective, Atlee tapped into her executive network at Shopify to connect with other female leaders who were looking to invest on the side.

What began as informal conversations about investing and advising after the working day coalesced into Backbone Angels, a collection of executive tech women sourcing angel opportunities collectively and making investments individually. Backbone was started in 2021 and has amassed a portfolio of over 40 early-stage startups, including Bird&Be, 1Password, and Blume.

Atlee tells us what it’s like to balance functioning as a cohesive unit while making individual investment decisions. Plus, we get to hear about her journey as a small business owner and what motivates her to invest in what she wants to see in the world.

Atlee writes angel checks of $10k to $20k, ideally at the friends and family round or at pre-seed, focusing on startups that address challenges for parents, small business owners, and Big Tech execs—three areas she intimately understands as the end user. Backbone Angels focuses on companies led by Black, Indigenous, and Women-led startups.

Highlights:

Atlee hopped on a one-way plane to San Francisco and left her U.S. national security gig in Washington, D.C., behind to head up a nonprofit organization supporting Bay Area Canadian tech entrepreneurs (and she’d never even worked in tech!)
She met early Shopify execs who convinced her to come work for the company doing developer relations and the app ecosystem. Casual conversations about investing and advising with her peers led to the creation of Backbone Angels.
Atlee prefers to follow her own intuition with early-stage investing, but she does have a tried-and-true framework for determining if a deal is right for her. She shares her tips for working as a collective and the reason she believes you should never overthink a “no.”
Angel investing is a side hustle for Atlee (Remember, she’s also a Shopify exec, small business owner, and mom), and she prefers it because it fulfills her in a way that going full-time wouldn’t.

Resource:
Want to Angel invest with other operators and learn from the team at Hustle Fund? Check out Angel Squad and resources created by Brian Nichols

(00:00) - Atlee Clark, Angel: Canadians breaking into tech and now investing with intuition and purpose
(01:33) - Building an ecosystem for Canadian tech founders: the story of becoming the first CEO of the C100
(06:38) - Meeting Tobi Luke and joining Shopify: a new adventure pre IPO
(09:34) - Founding Backbone Angels: a collective of senior leaders at Shopify coming together to write checks
(15:27) - First Investment: The power of patience and a developing a personal investment thesis
(23:21) - Worst Investment: Trust your gut and staying patient
(29:20) - The art of feeling a "no"
(30:54) - Best Investment: Highlighting Top Performers Calico and MIrza
(32:59) - Resilience in Founders: Overcoming Challenges
(34:15) - Current Investment Strategy: Today's Focus
(38:21) - Sourcing Deals: Networking and Connections
(44:46) - Lightning Round ⚡

Next Episode

11: How one of Arian Ghashghai’s virtual reality companies is on track to hit $20M in revenue after one round of funding

Have you ever played with an Oculus VR headset? You probably owe thanks to Arian Ghashghai. The former founder was working at Meta when someone in his network introduced him to an opportunity to invest in gummies. Yes, gummies.

That’s far and away from Arian’s machine learning roots, it’s now one of his best investments to date. Arian has since gone full-time into investing as the founder and managing partner at his own fund, Earthling VC, which specializes exclusively in making pre-seed investments into companies in the AR/VR and robotics domain. One of his investments is on track to do $20M in revenue this year after only needing to raise a single $1M round. We cover a lot of good ground in this episode, and we really get into how the rise of these “raise-once” companies is changing traditional VC models.

Arian invests $25K to $200K in pre-seed AR/VR and robotics startups through Earthling VC.

Highlights:

Arian was a founder and quickly realized he hated being a founder. He started at Meta as an applied machine learning software engineer and angel invested for the first time in a CPG company, a decision largely driven by how impressed he was by the founder.
To Arian, worse than losing money is being labeled as another dime-a-dozen investor with no unique insight or edge. That’s why he advocates for being a big fish in a small pond to reduce competition and make it easier to stand out.
Arian explores why VCs have traditionally been skittish about getting into VR and robotics, and why there’s never been a better time than now to start investing in these categories.
Arian is seeing a trend among companies that only need to raise capital once before they can rely on their own profitability.
(00:00) - How one of Arian Ghashghai’s virtual reality companies is on track to hit $20M in revenue after one round of funding
(00:29) - Welcome, Dan Hightower, a new co-host!
(02:00) - How Arian got into investing: Meta, friends, and gummies
(09:13) - Invest in the top 1% of founders
(13:02) - Treat your angel investing fund as a portfolio
(16:40) - Marker
(21:05) - On realizing deep tech was going to change everything
(27:20) - The four measures of an extraordinary founder
(31:46) - Lessons from the worst investment: Don't fall in love with your expertise
(36:01) - Check size, scaling, and sourcing
(44:12) - Truffle hunters vs. heat seekers
(47:19) - Speed round
(59:44) - Bonus Qs: The rise of raise-once companies and why aren’t investors investing in robotics and VR content?