Simply put, Tim and Jason really blew me away. Truly, they could have been selling Chia Pets and I would have listened intently. The fact that they were doing Unchained, where they had deep domain knowledge, recent experience in a similar company, a track record, customer connections, a network of people, and a deal teed up in an area of interest to us, made all of this seem too easy.
When asked to write about why we invested in Unchained Labs, my initial reaction was — piece of cake. Investors are frequently asked why we invested in XYZ Company and I find that many of us VC Types tend to five the same answers. Yes, they are a bit trite, but at their core, they are truly why we invest in companies. So the pat answers of team, market, model, with technology and a distant third, er, fourth, still applies here just as it does across the board.
I was introduced to the CEO, Tim Harkness, by Jack Nielsen of Novo Ventures, whom I’ve known for a few years. Jack is a great guy with terrific instincts around investments and teams and, in this case, it was a team he knew well from a prior company.
Within the first 15 minutes of meeting Tim and Jason Novi, I was mentally planning on how to advance this investment opportunity. Why the instant love?
Simply put, Tim and Jason really blew me away. Truly, they could have been selling Chia Pets and I would have listened intently. The fact that they were doing Unchained, where they had deep domain knowledge, recent experience in a similar company, a track record, customer connections, a network of people, and a deal teed up in an area of interest to us, made all of this seem too easy.
When one meets Tim for the first time in a business context, I suspect many people would use words like intense, focused, or driven. But wait, there’s more! He isn’t just intense. He is thoughtful, a good listener, direct, and hard-working (must have been the consistent string of emails at 4:30 am!)
To add to this, there is COO, Jason, providing color commentary to Tim’s pitch and chiming in with answers to the typical, sometimes inane, VC questions.
Brent: “Since your last Company was a similar model in this market and you guys have been around this area for the better part of 15 years in various companies, what would you have done differently with the last one (and by inference, what will you do differently with this one)?”
Jason: “We would invest more, and more quickly, in our commercial infrastructure, particularly outside the US where there are some tremendous opportunities. We probably didn’t do as well as possible because we were slower on the draw, in hindsight, than we probably should have been.” Or roughly these words.
Candor and introspection, without making excuses…and with experience and a few new tricks up their sleeves. Competitive advantage! Check.
As we were wrapping up the first meeting, we talked about plans for the holidays and I learned both Tim and Jason were hoping to go skiing with their families in the Sierras. This struck a chord with me as we too were planning to ski a bit over the holidays, conditions permitting. It gave me a sense that while these guys are hard-working, dedicated professionals, they recognize that there is more to life than just the deal, selling another widget, or what have you. Spending time with family and friends matters — a lot. In some regards, much of the pre-investment process is a test, both intended and unintended, and going both ways. From the Canaan perspective, they were sailing through school with flying colors. Not sure how I was doing in their eyes.
It’s impossible to get a VC to say more than two sentences without saying, “business model.” I’m not an exception…and there were several facets that I found very compelling:
Selling unregulated products in a regulated environment
Driving growth by investing in both commercial operations and adding new products or new features to existing products
Deep knowledge of the smaller players with whom Unchained could partner to build the business
Having a ready buyer universe and or a public market opportunity for shareholders to realize some return on their investment
Proven experience with this approach
Most investors want to learn as much as they can about a business before investing. For me, this is making sure that I can feel good about representing my investors at the time we write a check as well as thinking about how I might be able to help a company after we invest.
VC’s all claim we add value. Our egos tell us this, if nothing else. I guess I’m pragmatic enough to know that in some cases I probably do, and in other cases, not so much. At the end of the day, it’s up to the CEO’s and their teams to weigh in as to how much, beyond money, any investor brought to the table.
Back to team. During the due diligence process, I spoke with references for Tim and Jason. Diligence is critical; I have impressions based on meetings and other interactions, and diligence helps me determine if these impressions are on the mark, or if I am out to lunch. Turns out, that in this case, my Spidey-sense was on. Here is a paraphrased reference call.
Brent: “Thanks for taking my call. I just wanted to spend a few minutes speaking with you about Tim Harkness, Jason Novi and to the extent you know anything about Unchained Labs, your impressions on what they are planning to do.”
Reference: “Oh, great to talk to you. Tim is one of my absolute favorite people in the world!”
The references filled in more promising details. At the end of a couple of the calls, I did my usual wrap-up.
Brent: “I appreciate you spending so much time talking about Tim and your comments are so glowing, I have to ask if there is a rub?”
Reference: “Oh, yes, there is one thing. You don’t want to be on his compensation committee! He fights hard for himself and his team. That said, you know that he is fighting that hard, or harder, when it comes time to doing deals and representing the Company. And at the end of the day, as you know, we make money with people who aren’t wall flowers and who shrink away from a challenge. You’ll do fine. Wish I could join you!”
And finally, that distant third…technology. I joke with the team about naming the first product Hal 9000, I mean, Optim. Optim measures the stability of proteins that are an essential building block of countless new drugs and those in development. Unchained will play a small, but very important role in advancing novel, often life-saving, drugs to the market. Think cancer, nerve/brain diseases, dermatology, etc. While protein characterization isn’t likely to be on the bucket list for many people in the world, we are all extremely proud to play a part in helping to advance medical science. And we are going to make a difference because we have a team that knows what to do and how to make an impact.