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When I co-founded Tangram Vision with Brandon Minor in 2020, we had trepidations about how to approach raising capital from investors. After all…we weren’t SaaS. We weren’t an app. We weren’t even an eCommerce company. We were deep tech, specifically focused on robotics. We knew that there were investors that had an interest in this area, but we also knew that they were a very small sliver of the overall venture capital community. As a result, we had to go into fundraising relatively uninformed about how to present our fledgling startup to institutional investors.
With that in mind, I’ve always wanted to interview one of our investors to get insight into how they think about markets like robotics, and companies like Tangram Vision. So I did exactly that! I am happy to present to you the following interview that I did with Zann Ali, Principal at 2048 Ventures. But rather than me telling you about 2048 Ventures, I’ll let Zann do that. Read on below to learn about 2048, Zann, and his advice for robotics founders looking to raise money from investors.
Adam Rodnitzky: Hello Zann! Let’s begin at the beginning. Tell me about 2048.VC
Zann Ali: We are a five-year-old first-check venture fund, investing out of our second fund right now, which we started deploying last year. It’s a $65 million vehicle, almost exclusively focused on being the absolute earliest investor. That means leading pre-seed rounds, some early seed rounds, but typically earlier is better for us.
Ultimately, we're highly thesis driven and thematic. We focus on platforms, infrastructure, enabling technologies, and specific types of vertical SaaS and marketplaces. We're futurists at the end of the day, so we love seeing where the world is going to be in 5, 10 years from now and then investing in the things that we believe will power these eventualities.
Adam Rodnitzky: Tell me about deep tech and why it is an area of interest for 2048 in general.
Zann Ali: I think it's such an interesting time to be investing in deep tech. In venture, there always seems to be a shiny object - where most investors run to invest in the hype cycle, and then they move on to the next thing as soon as the luster fades. But, in deep tech, I think you find people, problems, and companies that have a fundamentally longer term lens, trying to solve real problems for humanity and change the world that we live in.
Deep tech companies might actually move the dial on civilization and humanity. I'm not discounting the power of SaaS - listen, we love that too - I’m just saying we really subscribe to the philosophy of building enduring companies that can make the world a better place, while producing outsized returns.
Adam Rodnitzky: Can you summarize for me what 2048’s investment thesis for robotics is?
Zann Ali: This is such an interesting time for robotics. We've all read these ancient texts with the promise of wonder machines, but modern day robotics only started 60-some years ago, which is really not that long ago. But why is now uniquely the right time for the robotics companies? I think it’s a supply-demand framework.
What is the cost to bring a robot to market, or in other words, what increases supply? When you think about advances in compute, cloud services, sensors, the cost of building software, 3D printing and prototyping, there's so many interesting things that have led to proliferation of robot supply that can now catch up with clear demand from customers that want more automation because of rising labor costs, labor shortages, and just an urgency to continue innovating and optimizing.
Also the death of the integrator model and a push towards RaaS business models. Today’s robotics company can build the whole thing in-house, and go sell a robot that solves a very specific problem for a very specific type of customer. And so that direct relationship with the customer and their problems, and the speed of development can create really virtuous cycles in the world of robotics.
There's so many other tailwinds that are going to help robots proliferate in the next decade, it’s such an exciting time.
Adam Rodnitzky: You mentioned that some of these investments have longer timelines. That might mean that when you see a deep tech company or robotics company coming in as an early pre-seed investment, the level of its maturity or development might be different than what you might assess with a software company. How do you assess one of these companies where it's got a long timeline and you have to deduce the opportunity with potentially less information than you would have from, say, a SaaS investment?
Zann Ali: Oftentimes, we're working on imperfect information, and so we work with founders to squint into the future together, collectively. If we believe that it's a large market, a real customer pain point, the exercise is oddly, very similar to SaaS. Of course, there are nuances of hardware businesses and robotics businesses. But, ultimately, the exercise is really the same. Do we believe there's a path to this becoming a really large company? And do we think these founders are the right ones to build this company at this moment in time?
Adam Rodnitzky: So, more so than an assessment, it becomes a collaborative process with the founders, using their perspective along with yours to jointly predict what could happen. When you do that, what sort of thought process or thinking are you looking for from those founders?
Zann Ali: I think there's some traits that every founder, regardless of the space they're building in, likely share. We've noticed a pattern that they're very mission-driven, itching to see the thing that they're building exist in the world. Not just purely mercenary, “I want to make a lot of money” perspective, but more “I think this is going to move the dial in some facet of the world and I want to make a lot of money.”
We really spend time with founders on “What does that mission look like? What is the ultimate vision that you're trying to build into?” And, so, there's also a lot of resilience, which is especially important for difficult, more technical businesses where there's going to be ups and downs along the journey. Hardware literally has the word hard in it - no one said entrepreneurship should be easy, right? And for deep tech or robotics businesses, resilience is highly critical for somebody who's going to proverbially eat dirt, and, as they run into walls, run through them and stay laser-focused on achieving their vision.
With that resiliency comes a competitive drive, and competitive instinct to always want things to be pixel perfect. And of course a huge maniacal obsession with building with a sense of urgency for bringing something into market. This bias for action is something we spend a lot of time assessing.
Adam Rodnitzky: One thing that comes to mind for me is that, within the world of robotics and other deep tech pursuits, you likely come across founders who have that drive to bring something new and interesting to the world. And they're not doing it from a mercenary perspective because there's no good way to do a fast follow. But, on the flip side, you may also have founders with little experience of the realities of building or growing a business. Is there a way that you try to see if they have the ability to learn or be open to guidance from you or other investors? How do you bridge the gap for somebody who's technically brilliant but perhaps doesn't have a business background?.
Zann Ali: The best companies can't be built exclusively in a lab. And the best technology, no matter how great it is…if there's no business acumen, it's going to be hard to take it all the way. But one person doesn't need to have everything. You look for teams that are complete in the skills that they've brought to the table. If you bump into an amazing technologist, there's nothing precluding them from building a large company, assuming they acquire those skills along the way. But, oftentimes, the skill set that they have is very different from a commercially-driven CEO. And, so, it's okay to have two or three people where the skill sets are complementary. But hopefully, collectively, they have all the skills to bring a product into market.
Adam Rodnitzky: A lot of founders, at least in the world of robotics and other sorts of deep tech, come out of research labs, which means that sometimes you have universities and tech transfer departments involved who can potentially complicate your assessment of a deal. How do you approach this?
Zann Ali: We love partnering with founders still in academia. But, one of the difficult things in these situations is figuring out what is a real business versus a science project - fundamentally, we don’t like funding tech that is in search of a problem. That is not good enough for us. We want there to be a compelling reason that this technology should exist.
I think it's okay for universities to be involved. I mean, ultimately, that is part of their business model.They can have a lot of claim over IP, and we spend a lot of time with founders working through that. It needs to be within reasonable limits, and certain universities that have a history of commercializing amazing technology and partnering with founders well. By no means is it a blocker, but it needs to be handled carefully - and it’s something we’ve done quite a bit of at 2048 Ventures.
Adam Rodnitzky: A founder that might be coming out of a university program or somebody who is working on a product in a competitive, emerging area may feel like they're on a tight timeline to build a business. They may feel that now is the only time to raise money, but they are also hearing that now is one of the hardest times to raise money. What kind of advice would you give to those founders who feel like they need to raise money now, but have concerns about the fundraising environment?
Zann Ali: The world moves in cycles and we're clearly not in the most fun cycle for founders. But if you, as a founder, have a vision for what you want to build, and you're on a mission to get this thing into the world, then you should ignore the backdrop, right? It's like the stock market. If you want to hold the stock just buy the stock, you’ll lose if you try to time the market. You should be in it for the long term.
There is a lot of gloom and doom in the market. At the earliest stage, I think it’s noise. By the time you build anything of substantial value, we’re probably in a different market backdrop. Also I will say that there are plenty of investors that are willing to continue to invest at the earliest stage. And, so, timing doesn't really matter if you really have conviction in what you're building and you feel like there's no other time to do it. Just go do it. If you wait, you might have missed an opportunity to build something of great value. History has shown time and time again that some of the best companies are formed in moments of turmoil.
Adam Rodnitzky: Ignoring the macro environment, then, what other advice would you give to a robotics founder who believes that they should go out and raise money from pre-seed investors? What do they need to prepare so that when they have a first conversation with you, you have confidence in them and what they're building?
Zann Ali: There's so many things that go into what I would describe as the “perfect pitch” but ultimately, I think people's conviction comes through loud and clear. The more conviction one has that they are on the right journey, the easier it is to convince others to join you.
In general, the more forward momentum you can show on any business before going to raise capital, the better. So what can you de-risk if you're building a robotics company? Can you build version one of your robot? Can you go land two customers, even if they're not willing to pay you yet, but at least indicate that there is some customer pull? If you can’t get that, can you at least go interview 20 customers? There’s always something to do to demonstrate forward momentum even if there is no revenue - and we’re okay with that, almost all companies we fund are pre-revenue. There is however a clear sense of purpose, a clear customer pull, and a clear plan.
We ask a lot of our portfolio’s founders to put together a document with 30 questions they think people will ask them, and then we have them write down their answers. If you feel like you're bluffing it in places, you probably are, it's not as tight. When that happens, ask “what can I do to de-risk more?”. The more prepared that founders are when they're going into these fundraising conversations, and the more confident they are, the better those conversations go.
Adam Rodnitzky: If I were to distill all of this down, I would say “focus on the viability of your business as what you present to prospective investors.” In some respects, that runs counter to what a lot of founders think they need to do, which is build a ten-year financial model, and create a deck that's so compelling that nobody could possibly say “No.” Do you think founders should still be focused on some of those traditional fundraising tools that are part of the canon of Silicon Valley?
Zann Ali: If you're building a robotics company, you probably want to have a refined view of what it’s going to take to build a robot, and what the margin profile of this business is like, but building pure conjecture ten-year projections? That level of detail is way too much for startups at the early stage. I think everyone acknowledges that these models are largely made up. Also, overly engineered pitch decks. I get turned off by them. The simplest messaging in black-and-white pitch decks have worked just as fine for us, as long as those words make sense. It's really about the narrative and founders proving to the world that they're the right people to build this.
Finally, I will say that if investors are asking you for ten-year projections, chances are you're talking to the wrong people.
Adam Rodnitzky: Assume a company gets investment from 2048. How does 2048 support its investments, once they're part of the portfolio?
Zann Ali: We like to joke that we want to be the least annoying and most helpful investor on the cap table. We're also lucky to have an NPS score of 100 from our founders four years in a row. So I think we're doing something right!
It comes down to recognizing that each founder is on a different journey, and we need to understand what their superpowers are and what their blind spots are. Giving the same service model to every single company doesn't make sense because different people will have inherently different superpowers. And so our job as partners is to look holistically at the business and see where those blind spots might be and how we might be able to plug those gaps.
Whether it's through introductions, through being a sparring partner that can help you think about pricing, or go to market, or negotiating your first contract - we want to be there working hand-in-hand with founders. Building a deep relationship centered on trust is very important for me when I partner with founders. I always want to be the person they first call. And most times, they call us first. I think we're doing something right with our founders if we have that relationship with them.
Adam Rodnitzky: If a founder wanted to approach 2048 as a potential investment, how do they get in touch? What should they do?
Zann Ali: Very easy. We never want to be the VC firm that says, “You need a warm introduction to get in touch with us.” If you go to our website, front and center is a big red bubble that says “Pitch Us” (Editor's note: Here is the pitch form for 2048!). We read every single submission that we get. And we're very approachable on most social networks, so people can always reach out to us via DMs.
I’d like to thank Zann again for participating in this interview. As Zann mentioned, he and the rest of the 2048 team are not hard to reach. Go ahead and find him on LinkedIn, or on Twitter/X, or learn more about 2048 Ventures on their website and Twitter/X.