Revolutionizing Venture Capital: A Conversation with Praveen Akkiraju from Insight Partners

0:28Welcome to the AI Chat Podcast. the enterprise and SaaS investment practice. And before that, he was CEO of Viptela Incorporated, a SaaS platform for enterprise edge, and also CEO of VCE, an enterprise cloud infrastructure company. Welcome to the show today, Praveen. Thank you, Jaden. Pleasure to be here. Super excited to have you on the show. I wanted to kick this off. I'm going to ask you a little bit about your background specifically. I mean, I guess the first thing is, did you always know, you were kind of interested in tech and in this space of investing and whatnot? Or is this something that you kind of discovered throughout your career and your journey?

1:05Talk to us a little bit about your journey to becoming where you're at now. Yeah, indeed. So I was fortunate to start my career at the advent of the internet age, if you will, the early days of the internet. And so at Cisco, where I started my career, we were a pioneering company that built the internet infrastructure. So I got to see sort of the entire economy that we take for granted today, built from the bottoms up. And as part of that journey, I got to play many different roles. I was in engineering, I was a product manager. And as I kind of got to run some of the larger businesses that on both on the service provider and the enterprise side, I ended up on the investment committee at Cisco, where, as you know, Cisco was a pretty prolific sort of acquirer of startups and technology.

1:58And so I got to sort of get a front row seat in the thought process of sort of how technology gets built and just the whole sort of, you know, build versus buy, you know, you're a large company, when do you go acquire companies, how do startups actually deliver value? And so it got me really intrigued into the startup ecosystem. And so as my career progressed and I transitioned out of Cisco, I ended up at Wiptela, which basically was a bottoms-up startup where we were building a SaaS platform. It was like a 40 person team. It was a phenomenal experience. So I got to basically transition from sort of the large corporate environment to more of a startup environment.

2:46I would say that was one of the hardest jobs that I ever did, managing a small company because it's a lot of fun and it's also a high wire act in many ways. And so I think that experience of kind of building businesses, both within large companies as well as, you know, as a startup, you know, scaling the business. And eventually we did get acquired. So it gave me a pretty good perspective of, you know, how technology and products get built, deliver, and how to compete in markets and such like. So when I, you know, when I kind of wrapped up at Wiptela post our acquisition, you know, one of the things that sort of I really wanted to do was to kind of take a step back and look at the broader ecosystem, in the broader picture of how technology was evolving.

3:35This was in the 2017, 2018 timeframe. And we were at the cusp of AI. And at that time, AI was really all about predictive AI and computer vision and application of computer vision, things like autonomous vehicles and such like. So I was really intrigued to be able to kind of go spend time with founders and understand that side of the equation better. So that's kind of when I transitioned to the investing side at SoftBank and then eventually sort of ended up at Inside, where I've been here for the last three plus years, primarily focusing on the areas that you talked about earlier. Very, very interesting.

4:13Yeah. And an incredible background. What I'd be curious to know from you is, how is your experience as CEOs, both at VipTel and also VCE, right? You said these are two of the hardest jobs you did running startups and whatnot, but how has your experience as CEO kind of influenced your perspective on investing in AI startups? Yeah, and that's a great question. I think you realize when you're sort of running a company and running a startup, there's so many variables that determine success, right? It's not just the quality of the idea or the quality of the market that you're in. And it's all of those combined with the team, combined with key decisions, how you make them, combined with the investors you decide to work with and how they help you.

5:05And of course, a slice of luck, right? All of this kind of combines together to be able to make for success. So when you sit on the investing side of the table, and from my perspective, having sort of earned my scars in the back, if you will, made mistakes and been in the hot seat. you get a better sense of understanding of what's really driving a founder when they kind of step forward and start this company, right? And I think you allow yourself to kind of, because you understand the variability here, you're not looking for like one amazing thing that makes a decision on whether this is the company that we want to invest in, or whether this is the founder we want to invest in.

5:52And you also allow yourself to kind of, you know, let the founder kind of discover that journey. So some of these pieces are not fully defined, right, at the early stage. So, you know, because, you know, I've been down that path, like, you know, there'll be certain aspects, certain decisions that are not clear until you get to a certain point in time. So it really kind of builds a much more holistic way of looking at an investment opportunity and a founder. And once we make the investment as well, I think you obviously respect a founder's journey, right? And my journey will be different from a founder's journey.

6:36There's different points in time, different variables involved. So you respect that. And so you try to help where you can add the most value, right, as opposed to sort of trying to replicate what you've done. So I think there's a sense of sort of better, deeper understanding of the process of building a company and what it takes for a company to be successful. And also, you know, when things go sideways, as they do, like a startup, you know, you have a better sense of like, look, you know, the sun will rise tomorrow morning. It's not the end of the world. And, you know, I think you get a better sense of both helping the founder through that particular situation as well as an investor making sure that you're not, you know, panicking or you're trying to put more pressure on a situation where they're already sort of working through stuff.

7:23Right. Yeah. Yeah, no, I think those are some really great insights. And then I guess specifically kind of looking at those founders that you mentioned, right? What are some of the key traits you look for in founders or entrepreneurs that are kind of aiming to disrupt fields? I know you kind of focus on like automation, data platforms, DevOps, infrastructure, software, that kind of stuff. So what are some of the key traits of founders and entrepreneurs that you're looking for? Yeah, I mean, I think, you know, one of the, for me, really the most important thing is is the way that a founder tells the story.

7:56And the important thing that in my mind sort of defines a key variable of success for a startup is really how deeply they understand the customer, right? And why whatever it is that they're building, right, really resonates with a customer and how the customer derives value. So when I listen to a founder, I listen very carefully about sort of how they tell the story. You know, if they're talking about like, you know, anecdotes of customers, right, problems from a customer point of view, you know, and the customer is kind of weaved into every aspect of their narrative that gives me a sense of, hey, here's a founder who obviously has, you know, phenomenal technology background, right, or what have you.

8:38But more than anything else, they fundamentally understand the customer, the problem, and how a customer will derive value from whatever it is that they're building. because, you know, success for a startup is really, as we talked about, multiple different variables. One of the key variables really is, you know, their ability to connect with customers in a meaningful way and ensure that they are realistic about how a customer will derive value from the product that they're building. So any understanding of that at a profound level is really sort of, from my perspective, the most important thing that I look for.

9:15Very cool. Yeah, no, I think that that's incredibly important. I love your focus there on customers, because at the end of the day, you know, we all know founders are people that have great ideas or vision for something. But the amount of startups that have pivoted is obviously insane. And if you don't have that product market fit, if you don't really understand the customer, you know, you're kind of just building in the dark. Something I would be curious to know is when you're looking at some of these frameworks around venture capital and everything going on today, how do you see the role of kind of venture capital evolving, especially in today's AI landscape where AI is getting integrated into everything?

9:49There's a lot of big shifts happening. How do you see the kind of the role of venture capital evolving? Or maybe what are some of the changes you think may come? Yeah, I mean, I think I'm a late comer to the investing game, if you will, right? I've sort of transitioned to investing after a long career as an operator. So my perspective, obviously, would be from that angle. So I think the way we are right now in sort of a challenging economic environment. I've seen a couple of these cycles on the operating side, where we went through the 2008 sort of recession and the impact that had. And so I think as a venture investor, the journey starts when you actually write the check.

10:38The journey doesn't, you don't celebrate when you invest in a company. And it's phenomenal. You're excited about the opportunity to work with the founder. But truly, the journey starts at that point because the founder is looking at you as a partner and somebody who's got to kind of, you know, obviously be there for you through the ups and downs, but more importantly, sort of, you know, as a contribute to the effort, right? You're part of the team now. Yeah, you're not sitting on a board just kind of watching things and, you know, essentially participating in a board meeting, but, you know, you are part of the team and you participate as the founder wants you to participate, right?

11:21So I think what that means for me, if we're going to break that down, you know, it's really sort of each of us as investors bring our own point of view. So I'm a product and an engineering background. So, you know, I can contribute to a conversation on product strategy, you know, scaling teams. These are things that I've done. So what I tried to do with my founders is basically say, okay, here's sort of where I'm coming from. This is kind of my background, right? Here's kind of what Insight can offer to you, right? And we have a pretty extensive set of resources that tap into. It's part of the reason why I actually joined Insight as opposed to a couple of other opportunities that I was looking at.

12:06And so, and then you sort of, you know, build a relationship of trust with a founder where they feel comfortable enough to come to you and say like, hey, I need help in these particular spaces. And so, you know, where is end of the spectrum? You're everything from obviously, you know, a capital provider to, you know, a product strategist to, you know, helping them with hiring to, you know, being a therapist, just kind of walking through a difficult situation. Right. Yeah. You play different roles, but the most important thing is that you have to first establish trust with a founder in a way that they understand how you can help them and you're respectful of sort of how you engage with them, irrespective of what your background is.

12:46And I think that's sort of the way I see my role as an investor. Yeah. And I mean, I think it's funny you mentioned being a therapist so often. I think there's a lot of different roles that venture capitalists are playing to date. Right. And of course, the reason for that is because there's a lot of challenges in startups. Specifically, what I'd love to ask you about is, you know, from your perspective and what you're kind of seeing, maybe some of your portfolio companies or companies that are coming across your desk, what are some of the most common challenges that AI startups are having today?

13:16You know, specifically for some of these AI startups and how do you think that they can overcome these? Yeah. You know, I think the first thing I'll say is, you know, AI in startups, right, as part of products and technology has been around for a while. I mean, the AI revolution didn't start in November 2022. Though the engagement and obviously it's caught the imagination of the world at large. So I think from my perspective, really, if I were to think about AI, AI is really a tool, right? And I go back to sort of first principles, which is, how are you solving the customer's problem and how is the customer deriving value?

14:00And I think a lot of sort of the challenge with AI, right, or sort of, I wouldn't say challenge, but the challenge opportunity is really to understand deeply how AI can further help a company engage with their customers in a meaningful way or deliver value to their customers in a meaningful way, in a better way than the way they were doing in the past. If those two don't check out, then there's no reason for you to be using AI, right? So I think that's an important thing to understand. AI in and of itself is not sort of, you know, it's a technology. And so how you use it to deliver value is kind of where the rubber meets the road.

14:41So I think when we kind of look at startups in this particular domain, you know, I have in my portfolio, for example, in Insights Portfolio at large, a lot of companies that have been leveraging AI, for automation, for natural language processing, OCR, computer vision, predictive analytics, all of these things which are essentially a different generation of AI are already incorporated into the platform. So the generative side of things, which is obviously the current sort of transition, if you're a current wave of AI, allows startups to essentially create a much better user interface, much simpler user interface.

15:21It's like using natural language to ask questions or replacing custom dashboards with generative AI potentially presenting the information the way you want it. So I think what we're trying to help our startups with is to really help them just think through this process of how is the addition of AI or the enhancement of the AI capability that you have in the platform, helping you differentiate yourself in the market with the better product and better value proposition for customers. And I think that really it comes down to that. AI is a tool. It's not, you know, sort of an end in itself, right?

16:02Yeah. Yeah. I love that. I think that's some really good insights into that. Something I would be curious, you know, of course, you mentioned this AI revolution. It didn't just start recently. This has been ongoing in for a long time, but it does seem to be accelerating. And maybe it's just, we're more aware of what's, you know, the acceleration, but it seems everyone being interested in it. Now everyone's, you know, all the companies are kind of focused on building on it. Something I'd ask is, you know, as AI continues to grow, what are some areas of opportunity that you're the most excited about for the next, you know, kind of wave of these AIs or startups and kind of the deal.

16:36Yeah. Yeah. And you're right. I think, you know, clearly this sort of generation of AI connects with the end user in a much more profound way than let's say a predictive analytics, you know, engine that's kind of doing risk predictions or failure predictions, you know, that's not quite visible, not, you know, something that you as a consumer or even a knowledge worker can engage with, right? The fact that the degenerative side, the natural language interfaces it enables is profound. So I can see like three areas where, you know, this generation of AI is going to be, you know, significantly sort of transformative.

17:17You know, if you think about sort of the best product market fit today for a generative AI product, it's the coding co-pilots, Right. Yeah. You know, those are, you know, for for a experienced programmer and it's not for the novice. Right. It truly is game changing in terms of your productivity. And so we've you know, we've heard from a lot of CIOs that as these coding copilots get deployed, they're seeing, you know, anywhere from 20 to 30 percent productivity improvements in there amongst their engineers. So that's a clear use case. It delivers value. It delivers a significantly better experience for developers.

17:54And it's been rolled out at scale in a lot of companies, right? So I think that's almost the most optimal product market fit that you have today for a generative AI product. The other area, obviously, is in the space of kind of copy generation, right? So you just saw Ryder, which is one of our companies, by the way, raised a big ground last week. Yeah, I did a podcast on that. Very exciting. Yeah. Yeah. I mean, and it's because they can deliver immediate value, right? You know, productivity for marketing professionals as well as the function as a whole. So that's another clear area where output is being generated and AI is helping accelerate that process, right?

18:40With a human in the loop, right? Making things much more efficient, much more faster, are much more accurate, right? So that's another area. The third area, I think, is really sort of where we're still in the exploratory stage, but we see a lot of sort of efforts in this space. It's really about data extraction summarization, right? Because this is another superpower of generative AI. So, you know, you can think about like examples where, you know, if you're doing research on a new drug, being able to kind of study drug interactions, right? You might have this content spread out in multiple different research papers or document or publications of different drug providers, being able to synthesize all of that and help a human researcher accelerate their process of figuring out in a good amount of detail these interactions and where they need to focus their research on.

19:36So this whole sort of data extraction and summarization as kind of a part of a business process, I think, is another area where we see, I think, a lot of experimentation happening across different verticals. And it could be pharmaceuticals, could be automobile, right? Could be, you know, just even data synthesis, things like named entity extraction, I think is going to be, you know, pretty significant, right? And then the other area is automation, automation of workflows. And you've had a generation of business process automation out there for a while, RPA companies that have been out there for a while.

20:20I think generative AI is transformational in this space. And primarily because I think you had a lot of these no-code, low-code ways of approaching automation, which could potentially and still, instead of TBD being worked out, right, replaced by a natural language interface. So, you know, the sort of utopia of this kind of technology is that you can describe an automation. You as a knowledge worker might say, hey, you know, scrape my LinkedIn for everyone with a founder title. You know, sort them by, put them into a Google Doc, sort them by geography or by, you know, area like AI. and send that list to my teammates in a Slack, right?

21:04And you might describe that in natural language and you should be able to basically build that automation and have it executed, right? Yes. So I think that's a transformational way where we see like, I mean, I gave you a knowledge worker example, but they're much more complex workflows in the enterprise that could potentially be transformed. So those are some of the areas. I mean, there's a lot more, but, you know, this is where I see a lot of very interesting things happening. Yeah, absolutely love that. I totally agree with you. These product workflows and automating that is going to be so key.

21:39I'm currently, you know, working on some similar projects in this space and just see some incredible opportunity there. Praveen, thank you so much for coming on the podcast today and for sharing your insights, everything you're seeing in this space. Absolutely incredible to, you know, to be able to hear from you. Once again, thank you so much for coming on the show. To the listener, thank you so much for tuning into the AI Chat Podcast. Make sure to rate us wherever you get your podcasts and have an amazing rest of your day.