Array Ventures founder Shruti Gandhi explains why she prefers modest investments

Array Ventures founder Shruti Gandhi
Shruti Gandhi

• When Shruti Gandhi started Array Ventures in 2015
  she had two principles in mind: Invest early, and help
  founders.
• While the world of venture capital is full of $100
  million checks and billion-dollar valuations, Gandhi prefers to
  fund seed stage rounds in the $500,000 to $1 million
  range.
• The former IBM engineer has a decade of experience on
  the technical side of things, so she knows when a product is
  ready to move a market forward.
• It’s this technical expertise that makes it so Gandhi
  and Array can get in early — and still bring in big
  returns. 

In a world where startups see a growing number of zeros at the
ends of checks — and, thus, at the end of their private-market
valuations, Shruti Gandhi’s approach to venture capital may seem
downright miserly. 

Gandhi, who launched her fund Array Ventures in 2015, prefers to
write checks to early-stage startups in the $500,000 to $1
million range. In many cases, the companies she invests in don’t
even have a developed product.

“We call it the agitated workforce,” Gandhi said of her ideal
founder. “They’re working at a company and they have very strong
expertise but they’re agitated that the tools they are using that
are not making them efficient.”

When they can’t find a better tool, they decide to build it
themselves, Gandhi said, and that’s where she steps in.

Gandhi will often get cut in on deals on the recommendation of
angel investors or VCs at larger firms who plan to write a check,
but don’t have the time or resources to give the kind of
mentorship that can help grow a very young company.

“It started three years ago with the idea that many funds are
becoming large and there is no one at the earlier stages helping
founders,” Gandhi said. “When I had my company, I didn’t
think VCs wanted to give you time of day unless you had figured
your stuff out.” 

In response, Array tends to be very hands-on. Gandhi prides
herself on helping founders build their networks and make early
sales. Array even runs a boot camp with its founders to spread
more knowledge, more quickly. 

When things go well, Gandhi said she feels like a member of the
founding team, tasked with helping startups grow from $1 million
in annual recurring revenue to $100 million. 

“We like to act like we’re their first business development
hire,” Gandhi said. “You get to be part of the founding team.”

It helps if you understand the product on a technical
level 

Gandhi knows a lot about building products — which is part of why
she enjoys getting her hands dirty with startups. 

An engineer by training, Gandhi spent nine years working at IBM
before founding a company called Penseev, which aggregated data
from social networks to create visual timelines of peoples’
lives.

Not every venture capitalist has a technical background, so they
don’t always have the best grounding to assess new technology.
That means it’s that much harder for innovative new tech to stand
out. By the time those investors have come around, it’s usually
later in the lifecycle, after the company already has some
traction. 

But in the early days, Gandhi said, it’s much more valuable to
know whether a product can disrupt existing competition. This is
particularly valuable when it comes to her own specialty, which
she calls “deep tech” — engineering innovations in fields
like artificial intelligence and machine learning.

Understanding what’s happening on a technical level means she can
invest in a startup before most other investors would consider it
worth their time. 

“That’s what differentiates a technical engineer fund manager
from a generalist investor: We know the in and outs of AI and
machine learning,” Gandhi said. 

It also means Array can get deals done quickly. While some
venture firms can take months to approve an investment, Gandhi
said she’s seen deals get done in a weekend, though it’s usually
at least a few weeks, she says.  

“Small funds have an agility. If they are focused, they already
have a point of view. And they don’t have to go through the
complicated partner dynamics,” Gandhi said.  

Array has already seen two exits 

Though the firm is just three years old, Array has made 34
investments into these tech-oriented startups, including
blockchain, robotics and AI. Of those, the firm has already seen
two exits.

One of those exits was Simility, a fraud protection and risk
management platform that Gandhi invested in at the time of its
2015 seed round. At the end of June, PayPal acquired
Simility for $120 million — more than double the $52.75 million
valuation it got during its December 2017 Series A. 

Another, the office task management platform Hivy,
got acquired by Managed By Q, an office operations platform,
in September 2017 for an undisclosed sum. 

Enterprise tech has been especially lucrative in recent years, as
a boom in IPOs and M&A have brought huge returns to investors
in companies like MuleSoft,
which sold to Salesforce for $6.5 billion, and Dropbox. which
went
public at a $9.2 billion valuation. 

But if you get in early enough, Gandhi said, it doesn’t take a
mega-exit for a firm to return money to its investors. 

“Enterprise founders are more focused on solving problems than
thinking through valuations, so if you’re helpful to founders, I
find them to be more generous and long-view oriented,” Gandhi
said.