An exclusive interview with Shomit Ghose, General Partner of Onset Ventures. The interview first aired as the 4th episode of The European VC podcast.
A little bit about Shomit Ghose
Shomit Ghose is the General Partner of ONSET Ventures, a leading early stage venture firm operating out of Sand Hill Road, in Silicon Valley.
With more than 130 startups and 7 funds under its belt, ONSET Ventures is a highly respected firm in the Valley. Shomit has operational startup experience from three successful IPOs.
Shomit has a highly successful career thanks to his tremendous insights into data driven business models. Shomit is known for his breakthrough thinking and for boldly stating that all human products are commodities; with data being the only exception.
We chatted about:
- If data ethics are the next big differentiator for startups;
- How the European and American VC landscapes differ and what we can learn from both;
- How to increase your presence and establish collaborations between US and European VCs;
- How to approach building a country-agnostic fund and the role of VCs, LPs and Institutions.
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Data is the only human product that isn’t a commodity
Being a VC is about helping to prepare the next generation of entrepreneurs. Shomit believes that everything in the world is data centric. Companies like Amazon, Google, Uber and many others are extremely good at experimenting with their data. And they do so in very nuanced and different ways. Except for data, all human products are commodities. These companies have an insatiable appetite for data and leveraging it as the ultimate source of competitive advantage.
As such, Shomit is very much dedicated to equip entrepreneurs with the skillset to compete with these giants. He wants to help founders understand how these companies view and use data; in particular how variety of data allows you to leverage it to drive insights.
Data as both a retrospective and a prospective resource
It is really interesting to look at data to understand what has happened. But, if everything is commoditised, there are actually only two way to compete.
And the latter is particularly interesting. The greater the variety of data available, the better one can predict the future. Shomit clearly believes that it is interesting to query and ask questions about the past, but much more interesting to correlate and expand into the future. It’s the difference between of drawing a clear picture of what happened in the past and drawing the picture of what will happen in the future.
Google, Amazon, Uber, and other companies fo the like, are doing this. Shomit shared the particular example of Uber, which is using data to forward price based on weather and location. This is basically a case of predictive pricing applied to a commodity product. But these companies take it even further. They actually hire behavioural economists and go beyond predicting behaviours to actually driving behaviour.
Data ethics as one of the most important sources of competitive advantage
Nowadays there is so much data that it might, quite easily, become intrusive, to the point of compromising our privacy. The point is to understand how to counteract this. Ethics is the foundation for future differentiation business models. Now more than ever. As individuals, we all want ethics; in our personal and professional life.
Shomit believes we must be thinking of cybersecurity in the terms of obscuring details about an individual’s life. We must reimagine cybersecurity as cyber-safety. In the same way as a firewall protects data stored on a server. This calls for a new set of innovation and startups in the field of cybersecurity. Tech users are now, more than ever, more aware of privacy and of its role as a pillar of liberty. No one wants to work with people who don’t have that sort of integrity and the same will come into play for startups.
European startups can start, from day one, with all of these philosophies enshrined in how the company is built. These can be ethics-first companies. Shomit believes that these companies will get even stronger, particularly because there are strong regulations in place in Europe. Shomit sees these as helping drive home the need for ethical behaviour; particularly because there is a trend, among younger people, favouring data ethics.
Global startups from day one
Markets are global and, in fact, the most successful US startups are global and were global from day one. None restricted itself to regional dominance. So if a founder is set on being very successful, by definition, there must a global ambition from the get-go. To be truly global one must understand how things work in the rest of the world.
The best way to acquire this knowledge is by working with people who are knowledgeable and can complement each other. For this reason, Shomit’s view is that collaboration is implied in building a successful enterprise. For any company to succeed, it has to be global. And that’s what Shomit is actually looking for: companies that think strategically and that want to be a global presence. He is looking for teams that are thinking about how can their product be impactful worldwide, and that have this mindset from the very beginning. This allows them to lay the groundwork for actually being successful worldwide.
Investing across borders
More and more we are facing challenges and opportunities that are global. No region will, by itself, be able to optimally address any of them. Going forward, Shomit thinks that this needs to be an onus for investors. With Covid-19, whilst in the past investment decisions were made based on face-to-face meetings between entrepreneurs and investors (giving a bias towards founders geographically co-located with the investors), today it’s easy for anyone to meet with a startup from the other part of the world.
The understanding that genius is global and that people are smart everywhere is actually beneficial. Shomit highlighted the value of making capital equally accessible to people no matter where they may be. By democratising the process of access to capital, founders with the best solutions and the most passion have a chance to shine.
Intellectual Venture Capital
The most important input into a startups is actually the guidance. It’s not the money. Money is a commodity. In fact, if money were the only thing founders needed, they’d be better off getting that money from a bank. The most important thing any startup can get is not the money, but the guidance on how to make the right decisions.
In the past these needs were best met out face-to-face, hence the requirement to be geographically co-located. What we’re finding out, through the dynamic of times of enforced social distancing, is that we can have really good relationships, as well as opportunities to provide really good guidance completely over virtual means.
Historically, the VC model has been really effective and will continue to be so. Mostly because it’s a way of providing risk tolerant capital, which the startups need, where, if things succeed, great, if not, founders are not left to having to repay a loan or something like that. The risk tolerance behind the capital is what has actually made the model successful and foundational in driving the modern world.
The anti-commodity here would be good guidance. It’s being able to provide the counsel to make the right decisions as a startup. As a startup, founders are in a situation where even the smallest miscalculation will lead to failure. So they need to constantly optimize making the right decisions given the circumstances them. Thus, guidance is what wins.
Shomit expanded a bit on this by proceeding to say that, maybe, we should look beyond the definition of venture capital. Look beyond it being monetary capital, and think of it as being the investment of intellectual capital. Thinking about it not just in terms of monetary venture capital, but in terms of intellectual venture capital.
- Venture Capitalists must think globally, and in an inclusive way, in order to cease to be a narrowly focused practice and broaden the aperture;
- Genius is global and exists everywhere;
- Fostering relationships in VC requires more than just the transaction, we need to get to know each other well before there is ever an investment in play;
- Building trust requires VCs to get to know each other, to understand who may be congenial with whom, identify personalities who may share congruent views when it comes to investment and technology futures.
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