Insight Partners’ Thomas Krane tells us what he has learned from his time in VC – and what he doesn’t want to see in a pitch deck.
Thomas Krane joined Insight Partners in 2012 and is now a managing director on the investment team. Insight is a New York-based venture capital firm that invests in growth-stage tech and software start-ups, and has backed companies such as Qualtrics, Shopify, DocuSign and Twitter.
Krane’s focus areas include cybersecurity, DevOps, IT automation and application software. He studied astrophysics at the University of Pennsylvania and was recognised as a Forbes 30 Under 30 venture capitalist in 2019.
‘Taking investment may theoretically help a founder go faster, but if the company doesn’t yet have product-market fit then it may not be the right time to raise a round’
– THOMAS KRANE
What has your work with start-ups entailed?
I joined Insight as an analyst right out of undergrad. I spent my first few years focused on originating new investments for the firm through our outbound model, which involves proactively building relationships with founders to position Insight for an investment.
I’ve had the privilege of spearheading more than 30 standalone investments, many of which were investments I sourced during my first few years as an analyst and associate, and I currently sit on over a dozen boards.
I’ve been fortunate to realise some amazing outcomes from my investments, including five IPOs and multiple strategic and sponsor-led acquisitions.
In your opinion, which areas of science and technology hold the greatest scope for opportunities?
I spent the summer after my freshmen year at University of Pennsylvania working in their astrophysics lab, where we used applied machine learning to detect previously unknown deep-space objects from large telescopic surveys – primarily galaxy clusters and supernovae candidates. The experience opened my eyes to the potential of applying data science and machine learning in a variety of scientific and commercial contexts.
What I found particularly exciting is that almost anyone (including a lowly college freshmen) could leverage popular open-source software to derive unique and profound insights from large datasets across a wide variety of academic fields. The potential to leverage these tools to democratise discovery and insights feels unlimited.
What are the qualities of a good founder?
The best founders in my portfolio have a combination of extreme drive and low egos.
They are visionaries but can tie the vision to the business model and top-line goals. They are fluent in metrics and reverse-engineer goals to the inputs needed to get there. And they recognise the importance of keeping their exec bench very deep!
Many if not all of these traits are learned from experience, both in business and in life.
What does a successful entrepreneur need to do every day?
The most successful entrepreneurs in my portfolio take a data-driven approach to management, breaking each company goal into its component parts and reverse-engineering the inputs so they can manage to the activity levels required to achieve targets.
This requires implementing the right data-driven tools to understand where opportunities exist in the business and diagnose challenge areas before they present a risk to results.
What is the critical ingredient to start-up success?
Human capital management as a strategic function and not an afterthought. Recruiting, hiring, promoting and top-grading. In particular, recruiting young talent right out school, as they tend to be more driven.
How can founders assemble a good team?
Identify high-potential individuals early in their career and build a path for them to find long-term success in your organisation.
Partner high-potential junior talent with experienced mentors so they can learn from each other. Create opportunities for your senior leaders to empower up-and-comers.
What advice do you have for founders who are starting to look for investment?
Taking investment may theoretically help a founder ‘go faster’, but if the company doesn’t yet have product-market fit then it may not be the right time to raise a round.
Consider the risk-adjusted return of an exit as a larger shareholder with a smaller absolute exit value compared to the dilution, risk and time required to get the bigger outcome.
At later stages, the more a founder is in control of the company’s destiny from a balance sheet perspective, the better position they will be in a fundraise.
Never qualify a growth plan on ‘being able to have the money’. I get nervous when I see a pitch deck that shows me two trajectories – one that is exciting ‘with funding’ and one that is weak ‘without funding’. To me, that shows a lack of confidence and control in the underlying business, or perhaps a company that simply is not right for the venture model.
What are the biggest mistakes that founders make?
They are too slow to build an A+ team. If a founder wants to take their company the distance, they need to surround themselves with the best people.
That means hiring and empowering execs that are more talented than the founder in each functional department.
What are your views on mentorship and the qualities one should look for in a mentor?
Mentorship is great if a founder is ready to receive it, but sometimes I encounter founders that are looking for an echo chamber instead of a mentor. A mentor is there to push and challenge a founder’s thinking, including closely held beliefs and implicit biases.
That doesn’t necessarily mean disagreement – in fact, the best mentors help a founder see the world in a new light. If mentors are only confirming existing thinking, then they are just a tool used to rationalise decisions.
What’s the number-one piece of advice you have for entrepreneurs?
There will be good days and there will be bad days. If you are confident in your product-market fit and you have many happy clients (who are not your friends) paying you real money, then it’s just about putting one foot in front of the other – and making sure you don’t run out of money.
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