Announcing Tau Fund II, Our Newest Fund

Excited to announce that Sanjay Rao and I have launched a new fund for Tau Ventures in the heart of Silicon Valley! Our previous two funds were focused on seed (announced Sep 2019) and to double-down on the seed portfolio and selectively invest in later rounds of new investments, especially series A and B (announced Apr 2020). Starting your own fund takes a village -- we have too many people to thank especially our entrepreneurs, LPs, advisors and coinvestors. Here is the FAQ aka what, where, when, why, who and how on our latest fund.

[What] are you investing in?

Our core focus is not a rigid framework but in general our thesis has 5 components:

1) applied AI -- have some distinct advantage (proprietary data, training AI faster, detect errors earlier etc) in applying AI towards solving a big problem

2) software and services -- but we are friendly towards hardware

3) three verticals -- that we have spent the bulk of our careers in

• (digital) health: we have appetite for regulatory oversight and 9-18 mo sales cycles
• enterprise: especially HR tech, fintech and cybersecurity
• automation: i.e., cars, drones, robots

4) seed stage -- whereas Fund I was focused on $250-500K, for Fund II our average check will be $500K. We can increase that check size if needed and have usually done so by partnering with our LPs.

5) roadmap -- companies that are are 9-18 months away from their next round.

[Where] are you investing?

We are focused for now on the US and Canada -- teams can be distributed globally but we need the CEO to be in either of those places. In our Fund I half of our investments are in the Bay Area but the other half are outside, especially in Boston, NYC, SoCal and Austin. These are among the geographies with the highest concentration of startups in health, automation and enterprise. We recognize innovation is everywhere and will gladly look at companies in other locations, whether it be Seattle or San Diego, Chicago or Cleveland, Toronto or Tampa.

[When] are you investing?

Now! As of writing this article we have 35 companies in our portfolio -- Sanjay and I are operators / entrepreneurs turned investors and believe in working closely with them. Between us we have 50 years in Silicon Valley and have found there are two critical things as you go from early to late stage: getting more customers and getting more investors. Our Advisors and LPs are invaluable in this process; various of our startups have found pilots and investments from them.

[Why] do you call it Tau?

Many meanings, especially in mathematics, physics and biology, which are emblematic to our investment thesis. Our direct inspiration is it’s a Greek letter equal to 2 times pi and considered a better representation of a circle.

[Who] are you guys?

Hopefully if you read this far you know us or have already checked our website and / or LinkedIns. =) I have worked across two different VC firms (Samsung NEXT Ventures, Norwest Ventures), cofounded a startup (last public news is it raised $140M in VC and was valued at $450M), and spent various years at Google. My cofounder Sanjay ran his own venture studio, was also at Norwest Ventures where we got to know each other, and worked at McKinsey and Microsoft. Academically we hail from Stanford and MIT where we trained as engineers and scientists and got our MBAs at Harvard Business School. We have both had 10x exits in our career and several of our past entrepreneurs are LPs in the fund. With Fund II the team will grow and we are actively looking for both summer interns and a couple full-time associates.

[How] do you raise a fund?

There are no absolute requirements on raising a VC fund but there are definitely factors that help hugely:

• Thesis -- Your distinct point of view on investing.
• Experience -- Especially if you have gone through at least one full cycle i.e., from start to finish in investing in a company.?
• Track Record -- Obviously related to experience, the stronger your track record (uprounds, exits) the better.
• Deal Flow -- This usually comes from long-standing relationships and networks you have built over many years.
• Resilience -- It takes hundreds if not thousands of meetings to raise a fund, more on this in a future post. I have raised significant funds for my non-profit and my startup, trust me raising a VC fund is harder.

Thanks all for your blessings. We believe AI is a tool by and for human beings to do good and do well, Tau Ventures is our way to help shape that promise.

These are purposely short articles focused on practical insights (I call it gl;dr -- good length; did read); many of my writings are at https://www.dhirubhai.net/in/amgarg/detail/recent-activity/posts. I would be stoked if they get people interested enough in a topic to explore in further depth. All opinions expressed here are my own. If this article had useful insights for you do give a like, any thoughts comment away.