Eugene Zhang is a founding partner at TSVC, a Silicon Valley based early stage venture capital firm that focuses on emerging deep tech and FinTech startups. Eugene has invested in over 170 startups, including ZOOM.us, Carta, Gingko Bio, Quanergy, TrustGo, Plus.ai, and Lambda School. He is always looking for visionary and articulate entrepreneurs building the next big hit in the tech industry.
Eugene Zhang is a founding partner at TSVC, a Silicon Valley based early stage venture capital firm that focuses on emerging deep tech and FinTech startups. Eugene has invested in over 170 startups, including ZOOM.us, Carta, Gingko Bio, Quanergy, TrustGo, Plus.ai, and Lambda School. He is always looking for visionary and articulate entrepreneurs building the next big hit in the tech industry.
An extensive network with domain expertise in various sectors is critical for building depth in investments.
Eugene Zhang: Was an American dream by. So it's like, wow. Being an employee can climb. The corporate ladder was not the only way you could be an entrepreneur, just like many other successful entrepreneurs, famous people in the back. Are you going to try?
Gopi Rangan: You are listening to the Sure shot entrepreneur 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.
Today's guest is Eugene Chung from TSV Capital. TSV capital is based in Silicon Valley and makes investments in startups with a strong technology background.
Eugene, welcome to the Sure Shot Entrepreneur.
Eugene Zhang: Thank you. Thank you for having me.
Gopi Rangan: Tell us about yourself, starting with how you came to the U.S.
Eugene Zhang: Yes. I was born in China, Shanghai, and then went to Shi. For doing the MC elementary and high school, and then spent eight years at a Beijing channel university that's eight years and then spent one-year in Japan.
And in 1990 came to New York for one year. And then after that 30 years in Silicon Valley.
Gopi Rangan: So 30 years in the Silicon Valley is a long time. A lot of things must have changed in those three decades. How is Silicon Valley different today compared to when you first?
Eugene Zhang: Yeah, so big changes personally gone through in the three-three town upside CO's for, for young people, who've been in the valley for less than 10 years, mostly this, they saw the up [00:02:00] trend.
Right until the pandemic. So the activity, the investment in all the, in the UMass their community, what they find is enduring in master and a series, a BMS to change this or much money is a more, plenty. That's just one aspect.
Gopi Rangan: Yeah, fundraising was much harder. 30 years ago, there were far fewer venture capital firms and the amount of capital available was also far too limited.
Now it's a lot easier to raise money and it's much easier to be an entrepreneur with all the resources available, all the cloud resources, and those kinds of things.
Eugene Zhang: Personally, I was very fortunate during the 30 years I have two tracks. One is the employee very fortunate working with them. Smart people and also very nice people.
So I work at a, some ecosystem and Cisco system and they'd have Juniper networks or buy with the help with the people I work with in my previous or previous, previous job, they helped me introduce me to the new companies on the second, the path as an entrepreneur. Also, I was 100% work with the people in the previous jobs.
So what to do when I started my own company in the early 2000, those days, fundraising was very, very difficult. So we couldn't very immediately go arrange a meeting with any Sandhill VCs. So we read our community like AECOM campus, those successful entrepreneurs, Taiwan, for example, to attend to them for see the money, all of that.
It's a very different situation. And when you get a meeting with Ms the semester, it was a big deal. Usually you and prolong calendar for three weeks away in the future, or that it was a big, a bigger deal.
Gopi Rangan: Yeah, things happen much more quickly. These days, most of the meetings happen in less than two weeks.
You don't have to wait for a month to travel the sand hill road to meet a. How did you start TSV capital and you started the firm about 10 years ago. Yeah.
Eugene Zhang: So I've been fortunate working with the big companies. And then the first with my food into the entrepreneur was when I worked at a summer ecosystem work with pier, he was developing a piece of software.
It's a mirror project, relate to today's a very long a system. So that was the first experience that later on the company was acquired, it was like American dream buy. So it's like, wow, you don't have being an employee or working climb. The corporate ladder was not the only way you could be an entrepreneur, just like many other successful entrepreneurial famous people in the valley.
And you could try, so that that's the first way. So, uh, later on I did my own company and after junior per, I started to be NUE master myself after 2000 being active as NGO, mostly by friends, schoolmates people. I know they say, Hey, yeah, maybe you have some money. I'd like to put some money in my company.
That kind of stuff. So that after certain deals and deals in 2010, by that it was after the financial prices. If there was the right time with a few, quite a few schoolmates, the chin high school mates to form this GPS. LP structure is the intro funnel build where a tiny 2010 was only $4 million a fund and the 10.
So it was, it's a community-based, a chain-wide Illumina in the valley. They have financially have some freedom. And then we started working on this part-time yeah.
Gopi Rangan: Yeah, I have a $4 million fund as well, and it feels like a small start, but it's great to see that over the 10 years you've built a great firm.
How is TSV capital different from other firms? What do you look for? That's different from other VC firms?
Eugene Zhang: Yeah, so I think we have been very buttoned-up very much part of, I think we were okay. The petitioners were or engineers, PhDs. Most of us have done startups, raising money, that nature. So it's really day one.
We it's a nowadays called an entrepreneur-friendly mentality and also it's a very community. They want, we always have more partners participating with different than domain expertise in various sectors. So that's how we got us started until today. After 10 years, we always go back and review. I know the in terms of how we do investment, how to make this firm successful.
So today we describe it as we are. So the key difference is that we, yeah, we are broad, and with depth by that, I mean to be creative, our fund size two or three partners. But, uh, we have, uh, five gender partners plus additional 12. And in the future, maybe more, uh, venture partners to be the core decision making network.
This is making met with the mechanism. So that's how we can cover more tourists.
Gopi Rangan: Can you give an example of one or two startups? How do you meet an entrepreneur? Where do you meet them and what do you look for and what stages do you like to meet these funds?
Eugene Zhang: Yeah, we prefer to meet them very, very early stage the seed nowadays, you can sort of say seed or pre-seed.
So that's the w where do we position as a fund by today, we have a, quite a board or deep network to do deal-sourcing about 30% coming from our network, Chinese immigrant talents in the Bay area, various schools, for example, the Zoom CEO, Eric. So I met him at a social event and then when he started a company, so that's how we connected, I invested in the company. So that's Chinese in all the head work.
Gopi Rangan: This is a really good example. Zoom has become so successful. What did you see in at that time with zoom? Zoom was not the first collaboration tool company. There were many other solutions like that, that already existed. What appealed to you?
Eugene Zhang:
Exactly. So we all know even Apple has a FaceTime for Zoom at that time. It's called SSP. I see Eric, you know, he came here as an engineer and every step, right. So he learned to be in, to do coding and be an engineer and then be a VP. So every step along the way, proving his leadership capabilities after the acquisition, by WebEx and like he was a VP, but he was willing to give up a lot of compensation and was determined to do the next generation of collaboration, video path.
So it's really about the people that shoot and all the drive and determination that it was the major, major decision point Feis.
Gopi Rangan: You like to track entrepreneurs over many years to see how they, their career progresses. And then when they start a company, it's a lot easier for you to form a company in their business.
Eugene Zhang:
So we, we look had is, of course, are used nowadays. You cannot have many is to know someone, things are moving very fast, but I'm the one, the number one thing we look at is the team and founder. We always need to know what's the reason they want to start this, start this company, what is the drive about crop?
So in our decision process, this always come as number one. So you want to understand that part? So come down to that, although we are very early-stage, but the entrepreneur has to make their decision first reading to take value risk. So on that part, we don't encourage you to say, "Hey, it's time for you to start a company, or you should start a company."
We are not in a position to do any of that work that has. Come 100% from the entrepreneur, we heard a lot of people say, oh, what do you like to hear? What is the company you like or that? So it's a very, every company is different so that the entrepreneur must make their mentor decision. First of course, things could change it, but that the two would start a company take on this difficult journey.
That decision has to be formed by the interview.
Gopi Rangan: A lot of VCs, including me, we ask questions about their background. We want to make sure the founding team has diverse skillsets besides all of those things. I'm sure you ask for those questions as well. In addition to all of that, is there something that you like to learn about entrepreneurs?
What do you ask them in the first few meetings?
Eugene Zhang: You know, so always for example, how did you come about. Decide to do this business. How did you, uh, founding team you come together? What is the connection there? What is the vision for this company? So those are common. The asks questions.
Gopi Rangan: What tips would you like to give to entrepreneurs before they come to meet you?
What can they do to prepare themselves?
Eugene Zhang: I think it would because we are very early stage. So certain companies belong to an existing market. Then you need to be clear about why you are tax better or tax cheaper. At least for the many things are in across sectors emerging. Then you need to articulate a very good vision because at the time you have maybe some user, or maybe you have an idea for prototype, or maybe you build something very basic and you don't have revenue and all that.
So now a lot of financial numbers you can demonstrate. So, but we will look for the vision and also you articulate the vision and also. Yeah, why this is the time for you to do this. So this is some basic things we care about.
Gopi Rangan: Yeah. Good entrepreneurs are exceptionally articulate with their vision. Is there an example you can give us about a startup where you heard the vision and it was very appealing to you.
Eugene Zhang: Let me use one recent example. There's a company called Privitar very, very early-stage entrepreneur. Came to us and say, we are going into manager the better way to manage the patients with chronic diseases. If you arrange a bigger surgery and all that and have you, there is a lot of prep work you have to do, you have to do this check.
You have to do certain things, you know, come into place that can, you can do the surgery by the time you could go to the doctor and then suddenly the checklists something. Then you have to be delayed and reschedule sometime because in life province, even Robbins. So it was a risk. So this entrepreneur is saying we are going to do a management system, working with doctors, the hospitals, it's very, not easy to sell, but then once you have traction, it's very sticky.
So that thing we clearly can. Two. And then we also a good DD and validate this as a huge value. This is another way to put it. Its software eats certain voting, coasts this in this case, it's the chronic disease patient, the management.
Gopi Rangan: This is, yeah, this is very interesting. You're giving real-life examples of conversations you've had with entrepreneurs.
How many entrepreneurs do you typically meet in a year? And how many investments do you.
Eugene Zhang: Yeah. Last year, for example, we invested in 11 to 12 companies. So our pace has been one or two per month by that we'll meet hundreds of startups in a certain company. We meet them. We say, we want to learn a bit more.
Yeah. We are typically investing about two to 10% in that range. I think the companies will be here. Over the 10 years we have invested in over 180 companies.
Gopi Rangan: You've probably met thousands of companies. How long does it take to go from the first meeting to the second meeting, to the final meeting where you say yes, you want to make an offer.
Eugene Zhang: It also varies. We have this culture in place. We tell the entrepreneur, we can work with the schedule. As an early-stage venture, we have to be very nimble. And so we tell them if you want us to move in one week, we will work with your schedule. We can call internal meetings, you know, every night. So that is our field in [00:16:00] our practice, but typically we acknowledge days.
If it's zoom, we meet them two times, at least sometimes that we have a third meeting, but a two-time comment to get to know them more 2020 was the year that we, most of the entrepreneurs, for one case, even the insurer coroner, Mary was very new by Southwest. We didn't get to meet yet face.
Gopi Rangan: Yeah, that was my next question.
How has COVID had an impact on your work? If you typically meet hundreds of entrepreneurs a year to make 12 investments, it's really hard to make those decisions without ever meeting the people in-person or across human connections, or that is very, very important.
Eugene Zhang: Definitely missing certain pieces, the body language.
But, we invest after three zoom meetings, and on the way we ask her questions, especially on the closing phase, along the way, we can learn a lot about the entrepreneur. So sometimes even you have an indication to invest. And then along the way, the way to, for example, closing the deal or the details.
Coming along then we can kind of show and then we could have pulled the trigger along the way, but I think enough or early stage, we feel we don't lose much by making decisions remotely. Yeah. We feel comfortable doing it remotely.
Gopi Rangan: I've always used a remote yeah. Interactions with entrepreneurs, and I've always invested outside Silicon valley consistently.
I do invest in Silicon Valley, but I'm always open to other cities in the US and outside the US. Never meeting an entrepreneur ever before, making an investment is quite difficult. So I'm learning to adjust to the new normal. It's a challenge indeed for everyone.
Eugene Zhang: Yeah. Something to missing totally away.
But we are also in a very active and competitive environment. On one hand, we have more entrepreneurs, all of startups looking for partners too. And then on the other hand, though, A lot of venture companies. So yeah, that's the dynamics. I mean, it's evolving very, very fast at a seed, a check size, also change it.
So we, as a culture, we decided to move at the entrepreneurs pace if we like the company. So we don't have a fixed set of processes. It just has to be two weeks within two weeks. We cannot do it when there's no such thing.
Gopi Rangan: So I see that you play with the pace of the founders and if they need to accelerate, you can.
But if they have more time, you will be able to spend time to do your due diligence and get to know them better, right?
Eugene Zhang: Yes.
Gopi Rangan: Yeah. So you have five partners at the firm. How do you divide the responsibility to each one of you focus on different sectors? Do you all collaborate on making decisions? Do five partners, all of them need to agree when you make an investment or can some people disagree.
How do you manage that over the year?
Eugene Zhang: I think in terms of uniqueness as a fund, we build an internal system management system over the years and learned a lot of lessons. We treat ourself also as a startup growing. And then the most important thing is to build the internal. Either you're caught a culture or a operating auto with it.
So today we are among our peers about this fund size. We are by far more people involved how to manage that. We have an internal system called a TD to manage its incentives or that. And we also publish that, that internally 100% transparent. On the decision part, right? We have a, we as a culture thing, we encourage the debating.
We encourage convincing each other in a small percentage cases we have to resolve to voting. We have an internal, uh, voting mechanism it's, uh, uh, close to a majority title. But the novel has to be more than one to be the so in Southern kids a week just cannot convince him even with the strong evidence one way or another to bully.
So that's a very important piece to making a fund. And then afterward, everybody had to live with the facts and move up. So, yeah, that's also the over the years.
Gopi Rangan: Yeah, I see. It's a collaborative process and you've developed the methodologies over the years and refined it to make it more transparent.
What can entrepreneurs do or what can they expect when they come to TSV? Does the relationship start with one partner? But even along the way they meet other partners also, do they need to pitch and convince one partner, or do they need to pitch and convince everybody in one room at the same time?
How do entrepreneurs prepare when they come to TSV?
Eugene Zhang: Yeah. So usually we get a one because we have a, quite a big team in various sectors. We want to capture all the emerging sectors. Right. Very early on. So once a company gets coming in, always we have a one party. With the interest and then inviting others.
Partner with related expertise to the meeting that's very quickly. So we don't need a, the entrepreneur to come into Eugene to talk and then arrange a separate meeting with another general partner. Or that is cool. But we are just one and all we, because if I'm the deal sourcing, it's me, I'm just like any other partner in terms of real contribution.
We follow the same formula and credit [00:22:00] allocation, all that. So I'm the person to embedding other peer in my partner, the MIT and relevant the partners to come and enjoy this deal team. So there's always that there's a one face to talk to. It's my responsibility. If I'm that a deal owner, the inviting related a partner to join this deal.
Yeah. Deal team. We call it. So, yeah, that's the magic.
Gopi Rangan: Okay, this is incredibly helpful. Over the years, venture capital has changed a lot and you've seen it over three decades yet. It is still not perfect. There are many more things that we can improve. If you were to change one thing in venture capital, what would it be?
Eugene Zhang: So clearly more diversified funds and more diversified entrepreneurs by that we have all the news press by people chasing. So the deal's valuation jumping from 20 to 40, right. For the first round, that thing. But on the other hand of may be other types of companies, not in that camp, maybe they don't fit into this kind of profile.
So part of the word is interesting. I think all the company, big companies, such as Shopify or sea limited, they all not typical Silicon valley. Right. So we are definitely in that role to bring the diversity into the ecosystem, a part of a member doing that, encouraging the good entrepreneurial coming in different shapes.
So, and from different locations and from different backgrounds. And that's, the word is more interesting. And the more diversified, I think we play a role, but I encourage him and maybe more people to play in this ecosystem.
Gopi Rangan: Yes, we certainly need more diversity in the ecosystem, which is good for everybody for returns, for our limited partners, for venture capital investors, to promote innovation and for entrepreneurs to have opportunities to build businesses.
So hope that happens more and more in the future. I want to switch to the next segment of the podcast and ask you about. Your community involvement. Is that a nonprofit organization you are passionate about? Which one?
Eugene Zhang: Yeah, so actually the other one has to do with deeply with the fund, how the fund was formed.
So we have this entrepreneur and executive club. It's a nonprofit organization, a team called a TEEC. So I was a very early on a member and it was a pet local president for quite a few terms. So that the roots I continue until today, right now, the activity involves not just providing an advise and to young.
Young people nowadays, it's no longer limited to a change in the only this pitching-wise schoolmates, including almost all the universities graduates alumni in the Valley. The work is almost a week. I do a weekly session with young people, ask their question, answer their questions. They also to pitch providing some advice in that nature.
So have been ongoing for many, many years.
Gopi Rangan: Well, this is great. I really enjoyed the conversation and I look forward to sharing your real-life authentic stories about entrepreneurs.
Eugene Zhang: So it's fun.
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.
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