Neil Devani, founder of Necessary Ventures, shares his journey from healthcare and healthcare policy to venture capital, focusing on mission-driven startups tackling societal challenges. He discusses his investment strategy, offering insights into evaluating startups for transformative potential, talent retention, capital efficiency, and impactful storytelling. Neil highlights the importance of customer empathy and avoiding gratuitous technology. He also advocates for quality over speed during venture deals, emphasizing the importance of long-term founder-VC alignment. With a thoughtful approach to impact and innovation, Neil provides actionable advice for navigating the VC landscape.
Neil Devani, founder of Necessary Ventures, shares his journey from healthcare and healthcare policy to venture capital, focusing on mission-driven startups tackling societal challenges. He discusses his investment strategy, offering insights into evaluating startups for transformative potential, talent retention, capital efficiency, and impactful storytelling. Neil highlights the importance of customer empathy and avoiding gratuitous technology. He also advocates for quality over speed during venture deals, emphasizing the importance of long-term founder-VC alignment. With a thoughtful approach to impact and innovation, Neil provides actionable advice for navigating the VC landscape.
In this episode, you’ll learn:
[01:49] How Neil’s early frustrations with the U.S. healthcare system inspired a desire to address systemic issues through technology and startups.
[08:43] Creating Necessary Ventures with a mission to invest in companies addressing major societal challenges with innovative solutions.
[11:38] Necessary Ventures investment strategy and philosophy: Mission-driven companies are prioritized for their competitive advantages in talent retention, capital efficiency, and market visibility.
[14:37] The importance of avoiding "gratuitous" uses of technology and focusing on practical, impactful applications.
[19:33] Speed vs. quality in venture capital: Prioritize long-term founder/VC alignment over short-term funding speed.
[23:13] Have deep customer empathy and offer a solution providing transformative value to win over investors.
[28:48] The future of Necessary Ventures: Fostering a unique approach to creating and measuring impact and value-add to startups.
The non-profit organization Neil is passionate about: Upsolve
About Neil Devani
Neil Devani is the founder and managing partner of Necessary Ventures, where he prioritizes investments in companies tackling complex challenges, particularly in healthcare, financial services, and education. His portfolio also includes startups in emerging technologies such as machine learning and robotics. Beyond investing, Neil serves as an advisor to various companies, nonprofits, and venture funds. He holds a J.D. from Stanford Law School, attended medical school at Drexel University, and earned a B.S. from Pennsylvania State University.
About Necessary Ventures
Necessary Ventures is a Silicon Valley-based venture capital firm specializing in seed to early-stage investments in AI, healthcare, and machine learning. The firm focuses primarily on companies in North America and Europe, with a particular emphasis on San Francisco, London, and New York. Its portfolio includes companies such as Plural Energy, Unlearn.AI, Readout AI, Magrathea, Rubi Laboratories, and Mooch, among others.
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"What is the the delta between what's available today and what you can offer?" And the answers to those questions were really strong. And obviously at this stage, they didn't have anything built. So it was all still hypothetical, but they had done the work to understand what their customers are looking for, why the market is less efficient than it could be and how they're going to make the market much more efficient by solving customer problems and pain points.
[00:00:32] Gopi Rangan: You are listening to The Sure Shot Entrepreneur - a podcast for founders with ambitious ideas. Venture capital investors and other early believers tell you relatable, insightful and authentic stories to help you realize your vision. Welcome to The Sure Shot Entrepreneur. I'm your host, Gopi Rangan. I'm here with Neil Devani. He's the founder and managing partner at Necessary Ventures.
Why is Necessary Ventures necessary? We're going to talk to him. We will ask him about his experience in venture capital. What kind of startups does he invest in? I know that he typically invests at the pre-seed stage and seed stage startups. What does that mean for him? What kind of founders does he get excited about?
And why does he say no sometimes? Neil, welcome to The Sure Shot Entrepreneur.
[00:01:27] Neil Devani: Thanks for having me, Gopi.
[00:01:29] Gopi Rangan: Let's start with you. You grew up in Northeast Pennsylvania in a small town, and then you became a lawyer and you worked in politics for a little bit and various other roles, and eventually you started your own venture capital firm.
But let's go back in time and talk about where you grew up and your life journey from there.
[00:01:49] Neil Devani: Yeah, so I'm a South Asian Indian American and grew up in a very rural part northeast Pennsylvania, an hour and a half north of Philly. And I love to make this joke that if you meet someone from a place like that, who has my heritage, there are two likely paths: either one of their parents was a doctor or one of their parents owned some sort of retail establishment, like a hotel motel, seven 11, Dunkin Donuts, something like that. And we were very much in the first path. I had a lot of family friends in the area, the second path, you know, it was a good, it was a good place to grow up. Everyone knew everyone, no one locked their cars, their homes. It was a great place.
I worked on a farm growing up and learned the true meaning of hard work versus being a VC. As hard as it can be sometimes it feels hard to be a VC, I always remember it's not as hard as being on a farm. But yeah, that was that was where I grew up. And went to Penn State, was pre med there, tried to convince my parents and my guidance counselor that I shouldn't go to college and that instead I should buy a gas station or a Dunkin Donuts and then make it successful and then buy a second one and a third one and by the time I graduated college, I would have had three businesses instead of spending money on college tuition, but they didn't like that plan, um, and I thought they knew more than me. So, I went to college, I went straight into medical school also in Pennsylvania. I was at Drexel in Philadelphia. And in med school is the first time I really started thinking about my life more like an adult and what I actually wanted to do, what I cared about, what I was motivated by.
At the time I was pretty frustrated as a medical student doing these clinical experiences and seeing how broken the healthcare system was and seeing that, you know, patients who didn't have insurance would end up in these clinics where they would be seen by students like me, and we could only see as many patients as we had time from an attending to volunteer to supervise us.
And when the attending had to go home to their family, which, you know, they would work a full day, then they would come volunteer at the clinic for a few hours with us, that was it. That was the end of the clinic and the line of 50 patients who are trying to get seen had no choice, but to maybe go to the ER at some point in the future if their situation worsened. That was eye opening and frustrating as well as feeling like the experience of practicing medicine, evidence based medicine is pretty repetitive. The idea is that you see something thousands of times or 10, 000 times, and then you know exactly what to do. And you're, you're kind of like an algorithm. That was not very exciting to me. So, I had to figure out my path and that's when things started to really expand and, change from there.
[00:04:26] Gopi Rangan: You've made a few sharp turns in your career along the way.
[00:04:30] Neil Devani: Yeah. So I did my second year of medical school and then my third year I did an independent study.
I actually tried to just drop out and my Dean smacked some sense into me and said, "Hey, why don't you just take a year to figure out if you want to drop out and go do whatever you want for the year and we'll, we'll save your seat." And I really appreciate him doing that. He had no reason to do that other than just being a caring person, which he very much was. He was very much like a mentor.
And so I took independent study year and I was very excited about access to healthcare, given the frustration I mentioned earlier. And so I go to DC and I get a job working in the Senate on healthcare policy. And this is right around the time of the Affordable Care Act becoming a concept and getting some momentum.
The senator I was working for was named Arlen Specter. He was a senator from Pennsylvania. And that's how I got the job because I was from Pennsylvania. And the other way reason I got the job was he had lost half of his staff very suddenly because he switched from being a Republican to a Democrat.
And he had voted for the stimulus bill after the start of the global financial crisis and was told there's no way he'll win office as a Republican. He's not going to get the support from the party. So he said, "okay, fine, I'll just become a Democrat." And so half the staff quit and they were trying to backfill. And I show up, you know, as this young kid who's very excited about healthcare reform and they need a body pretty badly. So they, they slot me in. And I get to really like love that job. It's pretty exciting. And in that job, I decided, "okay, I'm going to go to law school so I can do more than just healthcare policy. I can do other types of policy then." And I let go of med school then I moved on to Stanford. And when I got to Stanford, by that point, I was already a little disillusioned about government and politics. It didn't take very long. But yeah, I had a little bit of like, "maybe that's not what I want to do. What else am I interested in?" And first year, first elective, I took this class called Sovereignty, Globalization, and Technology, which is code for Peter Thiel comes in twice a week and, or three times a week, I think it was, and talks about whatever he feels like for the class. And we all just sit there and amaze in it. So yeah, Blake Masters was in that class with me, along with a few other people. And it was a very, very interesting path through how has technology shaped the world historically, and then how is it going to shape the world prospectively into the future?
And the sovereignty and globalization piece is more the philosophical or political lens of what is the role and the impact on the sovereign individual, then what is it on the collectivist global? It was a very, very interesting class. And so that led me to think, "okay, I could do this work in government that I was thinking about, or I could do something in technology", which seems like technology is shaping the world and leading the world and government is kind of trying to keep up and pick up the pieces or just kind of clean up around the edges where things are not going well.
But we keep moving forward with new technologies, and that's really what's making the world better. And so I decided, "okay, I want to do something in technology. Problem is, I don't know anything about technology. I know basic science. I know chemistry. I know biology, physics. I've done the higher levels math you have to do for med school," but like, I didn't know anything about software, hardware, engineering. And so I reoriented my law school education. Luckily, Stanford was very flexible about getting outside the law school. Uh, they had a lot of pre approved classes and other programs and other programs were generally very welcoming. So I was able to do a lot of computer science and learn some engineering and design and some business and understand how do you build.
Software. How do you build mobile apps, web apps? I mean, I started doing that and joined a startup right out of law school. I did graduate, didn't want to go through that conversation again with my parents of, Hey, I'm going to do something else now. So I graduated, took the bar and joined a FinTech company. That was my entry into tech, a long time ago now, but yeah, that's how I got started.
[00:08:32] Gopi Rangan: I want to talk to you about Necessary Ventures and startups, but I'm very eager to ask you the question, or do your parents feel proud of you now that you're a venture capital investor, although you're not a doctor?
[00:08:43] Neil Devani: I know they love me. I'll have to ask them if they if they feel proud. They're generally very sweet people. So I think they'll say, they'll say something nice.
[00:08:51] Gopi Rangan: What an amazing journey you've had from rural Pennsylvania in a household with health care as the most important topic, perhaps, and then you zigzagged along the way. You had such rich experiences in politics and in law and tech and later in investments and before you started your own firm.
Let's talk about Necessary Ventures. What was the genesis for Necessary Ventures? Why did you feel like you wanted to start a firm?
[00:09:16] Neil Devani: Yeah, so I had worked at two venture firms prior, and I had realized that if you're not the founder of the firm, or at least a GP, you're really not getting the economic value of your work because you haven't done one of the most valuable things to facilitate the venture firm, which is raising money, usually, right?
So I had made some really good investments. Those investments were doing very well. And I started realizing I'm not saying I'm not going to get What I could have gotten if it was my firm, or if I was a GP, so let me figure out how I can more quickly get to that path. I was getting a little impatient. And I also had realized that the companies I invested in that were doing the best and the ones I cared about most were doing things that resonated with me in a, in a deeper way, right? Back to med school and healthcare policy, I was always interested in this question of like, "what's the impact of what I'm working on? What's my impact on the thing I'm working on?" So when I looked at these companies, you know, they were, they were doing amazing things and they seem to have this latent power that other companies didn't. And I started to anthologize, what are those powers and how do we apply them to these companies in a more interesting and financially driven way?
And that started to create this kernel of an investment thesis more broadly than just any industry thesis. And so I went and talked to a few different firms that I thought could be a good fit. Like they had the right kind of culture and mindset around the things I was interested in and I couldn't get a job at any of them.
So that was, that was part of it. And also, like I said, the economic piece. And so I said, "okay, well, I feel like I know what I'm doing on the investments. I know how to source opportunities. I know how to diligence them. I know how to win a competitive deal. I know how to negotiate and structure deals. I have the legal background and I also know how to work with entrepreneurs after I've invested.
The only thing I don't know how to do is raise money for a fund. How hard could it be?" Turns out it's a little challenging, um, not the easiest thing, but I learned that too and that got us to Necessary; got it off the ground.
[00:11:26] Gopi Rangan: I can see the passion for venture capital and the passion to work with founders in your voice.
What kind of startups do you invest in? At what stage do you get involved? How early is too early and how late is too late?
[00:11:38] Neil Devani: Yeah. So, we like to invest from our fund in the first round. Now, if the company has a product and has customers, that's fine. If there's a first round of financing, we're still interested.
If they don't have a product and don't have any customers, that's also fine. That's where we often invest. So very, very early, we call it pre seed. I feel like a lot of these terms have become somewhat meaningless. But when I say pre-seed, what I mean is we want to invest in the first round. That's what our fund does.
We can lead those rounds. We're not religious about leading. We can be flexible, but that's, that's how we invest from our fund and invest pre-seed. We also have a syndicate where we invest non lead Series A onwards, and that's more of like a one by one opportunity. We put those together with our LPs. Sometimes we're following on to a company that came from the fund, and sometimes we're making an investment that's not in the fund, but we think it's a great opportunity, just a different kind of thing. So that's in terms of stage, you know, what we're looking for in our vehicles. In terms of the types of companies to talk about the thesis a little more, what we look at is: Is this company doing something that's good and instead of being an impact investor who tries to put that in an ESG framework or SDG framework that then the company reports to the VC and the VC reports to the LP, what we're looking at is what is the good that the company is doing and how can we use that to help the company tell better stories to different audiences and use that story to attract great talent, keep that talent very engaged and retained for a longer period of time. How do we use that story to go find capital beyond venture capital? Maybe it's non dilutive grant financing. Maybe it's impact equity or credit. Maybe it's a joint venture with a large corporate who wants to be a part of the story.
Things like that. And the idea there is lower the cost of capital, blend it down from venture, reduce the dilution. And the third thing we're looking for is can we use that story, use the company's mission to attract attention? And that's about earned and owned media. So how do we generate impressions from the press, from social media, from newsletters, podcasts, blogs, in ways that are less expensive than paid advertising impressions and more powerful because they're coming from a more organic, trusted channel that's done its own vetting.
And so those are the three different things we're looking for in the companies we're investing in, whether they're in healthcare, climate, or other sectors. It's do they have that mission orientation in a way that's going to allow them to attract talent, capital, and attention.
[00:14:20] Gopi Rangan: I see you have a very structured approach to this and you are especially the impact part.
Impact is such a fuzzy thing. So I want to ask you more about it in a minute. But let's talk about an example of one of your investments. How did you meet the founder? What went on in that first meeting? What got you excited?
[00:14:37] Neil Devani: Yeah, that's a great question. We had a board meeting today for a company called Plural that's in our portfolio. This is our only crypto investment. We've not made any crypto investments except for Plural. And what they're doing is tokenizing renewable energy assets. We co led their pre seed along with Compound, if you know those guys, and The first meeting came actually as a result of an intro from Mike Dempsey at Compound.
He was a good friend and brilliant investor. And he was actually on the first episode of my podcast, which I just launched. And so, Compound has done a lot of crypto investing and we have not. So it's something we talk about often. Cause I'm just curious how they think about it.
And this was one where it fit our thesis in terms of doing something that matters from the talent capital attention piece, but also was an interesting economic offering in the sense that a lot of these assets are illiquid. They're complex to transact, but underlying that is a lot of simplicity. They are at least let's talk about solar.
They're solar panels. It takes on, they make energy, they sell the energy, they get money. Like that's the whole equation, right? Um, I'm simplifying quite a bit, but like, it's a lot simpler than commercial real estate or even residential real estate. If you're thinking about these kinds of hard assets that are income producing.
So from that perspective, there was something interesting there about the audit ability of those about using blockchain about composability of those cash flows to long term PPAs versus like volatile rents. If you're familiar with commercial real estate, right? Like, some of these buildings are now being sold for nothing because they're underwater versus the debt that they have.
And that's because there's a sharp change in commercial rents. Residential real estate doesn't fluctuate that much, but also still has volatility driven by rents. Energy costs may be volatile, but companies are signing 10 year, 15 year PPAs, which is like a very long term lease, and they're going to pay a certain amount for energy being produced.
And we can expect the sun to rise every day. If it doesn't, we probably have other problems. So it's a, just a different kind of asset. And there was something very interesting about the combination of that and tokenization and transactions that are enabled by, by cryptographic technology. So yeah, that's the way that that investment came about.
[00:16:51] Gopi Rangan: This is a different kind of business. First, it's connected with distributed resources and there's an ongoing part where you monitor energy usage and payments and all of that. And then on top of that, there's a layer of crypto. What questions did you ask the founder in the first meeting?
[00:17:09] Neil Devani: Yeah, there were a couple questions I asked. There are companies that we look at and we think of as being like a gratuitous use of technology, right? And what I mean by that is a crypto company where it's crypto just because the people who are going to be involved like crypto whether it's the vc's investing in the company, the founders, the people that they're doing business with as partners; but there's not real utility. There's not real value that you can explain to someone who's outside of crypto. And we see a lot of that with ICOs and NFTs and now deep in and whatever the, the next generation is, right? There's lots of these gratuitous uses of technology. And this is one where, you know, I just asked like straight up, is this going to be a better way to do these transactions?
Why? Like what are the evidence points that you have this is better for someone who doesn't care at all about crypto. They just want to save money on their initial issuance and then subsequent transactions, or they want to have a more streamlined process of distribution. So they want to be able to borrow against their assets and in easier, more transparent ways.
Are these things true? How are they true? Like, what is the, the delta between what's available today and what you can offer? And the answers to those questions were, were really strong. And obviously at this stage, they didn't have anything built, so it was all still hypothetical, but they had done the work to understand what their customers are looking for, why the market is less efficient than it could be, and how they're going to make the market much more efficient by solving customer problems and pain points. That's what we look for. Similarly, like in robotics, there's a lot of companies that are building robotics and the robots just aren't better than humans.
They're cool. And they're doing things that are better than existing robotic technology, but when you go to the customer, the customer's like, "why would I use this? I'm just going to have a human do this job." And that's like a another example of what I mean by gratuitous. So what I was looking for in that first meeting was, okay, is this gratuitous or is this actually providing utility?
And it was pretty clear that they were focused on utility. They had a very clear understanding of how they were going to create utility. And so, yeah, we made that investment.
[00:19:15] Gopi Rangan: I see you go through a thoughtful process. You understand the technology, but you also want to make sure that there's a viable business here. And the way you approach that is with these nuanced questions. How long does it take for you to make these decisions from the first meeting to the time when you say, "yes, I want to invest" even as a lead?
[00:19:33] Neil Devani: That's a really good question. There's a high variance on this. I think a lot of founders get wrapped up in this idea of a round being done in two weeks, because they hear from their friend, "Oh, my round was done in two weeks." And then the reality is the round was done in like three to six months because there was a whole lead up process of pre marketing founders and VCs talking and like exchanging what might be the idea, what might be the raise. And then there's like a very tight period of like lots of meetings that are like hard pitches, and then it turns into a term sheet or multiple term sheets, and then the deal gets signed. And then there's like another month or two, if it's a price round, right of like docs being negotiated and all that stuff.
So for us, you know, we try to make decisions as quickly as possible, but it can be anywhere from, you know, a couple of days to a couple months. And it's not a really satisfying answer for founders to hear because Then they're like, well, wait, how long is it going to take me and every case is different, but now we've made decisions very, very quickly when we have a prepared mind, when it's someone we know. We've invested in founders, you know, some folks I've known for like over 10 years. That's a shorter diligence process on who this person is and their background and, you know, references and things like that.
Versus someone we never met before in a sector that we don't know as well, with a business model that seems kind of novel. That's going to take a little bit longer for us to figure out and get comfortable making an offer.
[00:20:57] Gopi Rangan: I've been in VC for 15 plus years, and I remember in the early days in venture capital, there was no round that was done in a matter of days or even weeks, a month was very common.
And that was good for the founders and for the VCs because the founders used the time to really understand who this VC was, meet them in multiple forms, multiple formats of meetings. They had time to do backchannel references on them with other founders, and the VCs also had the time to develop conviction and stay behind these founders for the long term.
But in the world we live in today, where speed has become so important, all of that is gone. The founders and the VCs meet and they try to make a decision in one or two meetings. And that's very hard because the founders just go with the momentum of whoever's ready. And that speed becomes a higher priority than the quality of the investor, their commitment to build a portfolio and stay with the founders for the long term.
They don't optimize for that. And the same for VCs, like they, they just form a flash conviction, which may or may not last. And they lose conviction and they don't like the startup anymore. And I've seen so many examples of that. So time is sometimes good. It's a good friend. It helps form long term bonds.
[00:22:15] Neil Devani: Yeah, I think that's very, very true. There's value in founders getting to know VCs and understanding who they are, especially when they have multiple options. But I think a lot of folks just want to get done with it so they go back to building the business.
And so they over optimize on speed and then they end up with VCs, like you said, who are making decisions, not based on conviction and a deep understanding and first principles thinking, but based on who else is investing or who invested in the last round, or what's the KPI today and the KPI today may actually impact what it's going to be in 6 months, 12 months, 18 months. It may not right. It may be completely unrelated. But these heuristics are how we start to make poor decisions versus taking the time to come up with a deep understanding of what we're looking at and what we're trying to solve for.
[00:23:01] Gopi Rangan: How many companies do you meet and how often do you say, yes, I want to invest in this company?
[00:23:07] Neil Devani: So personally, I will meet over a thousand a year and say yes to five or ten. As a firm that thousand is like one step deeper in the funnel and our overall awareness or other folks on the team, and we're looking at about 5000 a year.
So it's a it's a really low conversion rate, but yes, as a fund, um, it's a decent clip, uh, in terms of the number of investments per year. So we're trying to see as many opportunities as possible and then make that decision based on where we have the highest conviction and do the deeper work before we make an investment and then do the deeper work after we make the investment as well.
So, um, just have to be pretty tight with our time.
[00:23:51] Gopi Rangan: What role does the team play in helping you form that conviction? I see you have a lot of advisors and venture partners and many others on your team who help you get to that finish line. How do they help?
[00:24:03] Neil Devani: Yeah, that's a great question. So yeah, we have advisors who are there as industry experts and advisors generally can give us very quick feedback on if something's a problem or not or what other solutions might be out there; if a business model is interesting or not. They can help us meet potential customers for the company. That will be good diligence for us as well as good intros for the company. That's the role the advisors play. Most of the advisors are also investors in the fund or people I have known for a very long time.
So we have that authentic like feedback back and forth, which is really valuable. We have a few venture partners as well who similarly have depth usually in certain sectors. We have some amazing venture partners on the team. Nachi is a technical advisor and a venture partner.
And he was employee number one and the former CTO at Crea Therapeutics. They're like one of the biggest gene therapy companies. He's also a emergency room physician. He's also a math and computer science PhD from Oxford and did high frequency trading, algorithmic trading of like Forex and commodities.
And so just a very broad thinker and has a lot of knowledge across a lot of areas. And having folks like that as venture partners allows us again, to get really smart about certain technologies or scientific things and make better decisions. Beyond the advisors and the venture partners, we also have a strong team of fellows who are a mix of graduate students in like PhD programs and MBA students.
And then we have a team of scouts, about 40 plus scouts. And the fellows are kind of in that top of funnel. So they're, they're scraping the real world, so to speak, finding opportunities at different campuses inside of different companies. Some of them are working on internal theses. And then we go out and we look for those companies.
Some of them are more like, let's just look at as many different things as we can. And then the scouts are more, even more top of funnel, right? Just like canvassing different networks, different organizations that they're a part of and or their venture backed founders themselves who get a ton of deal flow from other founders reaching out to say, Hey, how did you raise $50 million? Or how'd you raise $100 million? Like, can you give me some advice? And then that that flows to us. So we have these different groups of people who really help extend the team because we are a smaller firm. And that allows us to, to see just a lot more opportunities and move through those opportunities much more quickly.
And then also hopefully do that in a smart way.
[00:26:36] Gopi Rangan: You see thousands of companies and your team helps you kind of whittle it down to the five or 10 that you end up investing in. You probably come close to 25 of them before you get to the five or top five or 10. And you probably take multiple meetings with about 50 to 100 companies per year, you take a serious look at them.
Now, what's your most common reason to say no? I'm not asking about how do you get from thousands to the top 200, 300. But once you meet the founders a few times and they're in the top 100, 200 startups that you take a serious look, what's the most common reason for you to say no?
[00:27:13] Neil Devani: So if I had to drill it down, I mean, I'll give you the general answer first and I'll drill down to just one thing. It's like a red flag of a like hole in their knowledge or experience, which is so many different things, but like the way I feel about it, the way I think about it is I would like this except for this one thing and that one thing is like this founder or this founding team just has no knowledge or experience about marketing this kind of product so that's definitely gonna be a challenge or they have no knowledge or experience about building this kind of product. So that's the, if I say that as like the general answer, uh, hopefully that's still specific where it's like, there's one like very weak part of their game of the total package and that's a challenge. If I go much narrower and give you a very specific answer, it's not understanding their customer well enough.
So maybe they, uh, can build a product really well. They have marketing experience and they have all the things. They just haven't spent enough time with the customer to really understand the customer to have empathy to be able to predict how is the customer going to respond to this kind of offering this kind of pricing this kind of copy in an ad like these kinds of things. Amazing founders know their customers sometimes better than the customer even knows themself and or the user if you want to use user instead of customer. And if we just feel like the founder of the team lacks that empathy hasn't done the work to understand that that's probably the biggest reason and the most common reason that we're like, okay, this is not going to be a good investment.
[00:28:48] Gopi Rangan: And that's a combination of both data, numbers, quantitative stuff, and also your gut feel and subjective things that sometimes it's even hard to explain to founders why you can't get there.
[00:29:01] Neil Devani: Yeah. And that's also like outside of deep tech. In deep tech, the number one reason we don't invest is because we just don't think it's going to be interesting enough. Like assume that the team can achieve what they say they're setting out to do and just assume the science and technology part is possible.
It's still not interesting enough because it's like a 20 percent improvement on something that is not a top priority to be improved that marginally. And if it was an order of magnitude improvement, you could get some attention. But even then it's not a top priority companies that are like, "oh, we're gonna affect this process and we're going to make this process 20 percent better. It is kind of in a way that customer empathy, because like no customer is going to give them the time of day to improve this one input by 20%. It has to be significantly better. That's another very common reason we pass on the, on the deep tech side.
[00:29:50] Gopi Rangan: Neil, you're really opening up and you're sharing your thought process and how your mind works, what goes on in the team, what conversations you have. This is incredibly helpful. I want to talk about impact. You mentioned earlier impact. I see that you focus on impact from the startup side. I'm curious to see if you also measure impact of your work at Necessary Ventures.
[00:30:11] Neil Devani: Yeah, that's a great question. So we try to be very careful to over emphasize what we can do for founders and, and not be those investors who you promise the sun and the moon and then don't deliver on anything. And so we're thoughtful about where we are in our journey as a firm and where we want to be. You know, when we look at the companies we're investing in, as I mentioned, they generally have this inherency where they should be able to out compete the market for talent, for capital, and for attention because they have this mission-based narrative. And so my V zero of this was just realizing that this was a thing and documenting these inherencies.
My V one is trying to help the companies by sharing case studies of what I've seen other companies do very well. And V two, which is where we are now is getting our hands dirty, helping companies a little bit. So, uh, helping founders like find people that they can hire and figure out how to talk to the talent market generally about the company's mission to attract great people and how to talk to the team and build a culture where people understand the value of their work and the value of the mission of the company.
So that's kind of in this V2 strategy of getting our hands dirty. Similarly with capital, it's like helping now founders think about where they can find capital beyond VC and whether it's worth it or not; how they should sequence talking to VCs versus potentially talking to impact investors or finding other sources of capital. For example, we have a company that's looking at doing like a sale lease back strategy because they have physical space as part of what they're doing.
So that's another thing that's kind of marbled into this capital vector and, and thinking about the strategies and now actually starting to get our hands dirty with it as another thing that we, that we do. And then on the attention piece that that third vector, you know, the work there is starting to look like us in partnership with a messaging firm called Needle PR, where we've been able to put together certain playbooks and best practices and packages for founders to go out and attract attention to the business.
And those are things that I would say are in this V2 and then there's a future V3 or V4 that looks more like a platform version of Necessary Ventures and our value add comes from like a platform team. I think that's probably where we'll end up. We may take other paths, but that's the current thinking.
[00:32:41] Gopi Rangan: It's refreshing to see this perspective that you're actively prioritizing how to create impact and how to measure impact. Good luck in the next iterations of the version to get to v3, v4 and to the platform. We're coming towards the end of our conversation and I want to ask you about your community involvement.
Is there a non profit organization you are passionate about? Which one?
[00:33:03] Neil Devani: There's a few nonprofits that I care about a lot. So Upsolve is a nonprofit that I've been working with and supporting for a while. It's basically turbo tax for bankruptcy. And now they're working on similar approaches to other legal problems.
So for people who don't know, if you want to file bankruptcy, you have to go to federal court to do so. If you are in a hundred thousand dollars of medical debt, you probably don't have the extra money to hire a lawyer or the cognitive capacity to expend cognitive load on figuring out how to file a multi hundred page document in front of a federal judge, where if you are incorrect, or you lie or something, you could go to prison, right?
Like the it's, it's somewhat high stakes. And so people are stuck and they don't file for bankrupcy when they should/could. Upsolve is And they have done an amazing job of making it very easy to help people get out of debt and get through bankruptcy. And they've helped clear, you know, 600 million plus of debt at this point. They have hundreds of thousands of people that they've helped. And it's just an amazing, amazing nonprofit.
[00:34:16] Gopi Rangan: Neil, thank you very much for spending time with me. This is a very fun conversation. We could have easily spent an hour or two to talk about Necessary Ventures, but we have to conclude now.
I am excited to share your nuggets of wisdom with the world.
[00:34:30] Neil Devani: Thanks, Gopi. It was a pleasure.
[00:34:33] Gopi Rangan: Thank you for listening to The Sure Shot Entrepreneur. I hope you enjoyed listening to real-life stories about early believers supporting ambitious entrepreneurs. Please subscribe to the podcast and post a review.
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