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Making capital allocation decisions in low information environments and with alot of uncertainty is hard. This show talks to people who do this every day and teases out how to be good at it.
Martin Tobias (00:00)
Hi, this is the first bet. And everybody gets interviewed about how they won. And very few people drag investors back to the moment before they knew it would work, when the money was real and you s had to decide to put your chips in with very little information. Today this discussion's a little bit personal because I was in the hand with this guy, Mahesh. In May of 2022, Mahesh emailed me two deals. One was a company that
put locked medication dispenser and software into assisted living facilities. He was putting in a small check and wanted to raise a little more. And I didn't know much about it, but I trusted him and I wrote the check. And there was a good 18 months after we did that initial pre-seed where the company kind of struggled to try to raise additional money, find product market fit, and so on. It was not an easy company to raise money for even after we invested.
And today that company Improve on Health sells software to state governments for medication and compliance. Something a little bit different, maybe a big pivot from what they were sh initially started. But in the last year and a half, they've gone from about half a million of revenue to well over ten, twelve million dollars of revenue and is doing very well. So Mahesh runs Novation Ventures, a pre seed fund that underwrites the hard stuff, science, medtech, diagnostics, and
early things like this improve on health. And what I'd like to talk to him about a little more is that and some other things about how he gained conviction when there's very little information. Mahesh, welcome.
Mahesh Narayanan (01:33)
Thank you much, Martin. Thank you for inviting me and yeah, excited to talk about infro on one of our first investments together. So it should be a good conversation.
Martin Tobias (01:42)
Yeah.
So take me back to that twenty twenty two. Tell me the state of your thesis and how you met the company. You were just trying to raise newvation ventures and you closing capital. So maybe take us back to where the f what the status of the fund and then how you met this guy and what got you what you liked and what got you convinced to write a check out of the very limited funds that you did have.
Mahesh Narayanan (02:09)
Yeah, absolutely. So so I met Justin back in twenty twenty one, pretty much April
Martin Tobias (02:12)
twenty twenty one.
Mahesh Narayanan (02:13)
twenty one. It almost a year before we actually made the investment. and at that time, again, the it was still an idea. it was just Justin and kind of his story, with I know how unfortunately he lost sibling you know to overdose of medication and and he wanted to help fix that problem. And you know that's certainly one of the the
I guess key signals for me is how how close is this founder or any founder to the actual problem itself? And and for for him it was very much personal. and and part of the reason, you know, even I started V nevation ventures was was a very personal, you know, a deep connection in within the family for how we invest in in euro. And so but when I had that alignment, you know, I've been worked with him, he had actually joined an accelerator that I part of
Martin Tobias (02:53)
Yeah, that's right.
Mahesh Narayanan (02:57)
and we were trying to see how to get this idea off the ground.
Martin Tobias (02:59)
and so
the last point came it was that idea of maybe we have to predict it and
Mahesh Narayanan (03:00)
And and so at that point he came in with this idea of hey, we have this medication administration
for in intellectually disabled individuals. and
Martin Tobias (03:08)
Okay.
Mahesh Narayanan (03:09)
how do we how do we expand on this? You know, where do we go from here? Because it, you know, that that's not a big enough market. So where where else can we expand on? And and that's where the long-term care facilities and geriatric facilities kind of start to slowly come about as a potential way to gain a much larger
market than just going after I D D clinics which you know are are are we're we're a handful of them in the US. And so th they just weren't enough to make a company a fundable, investable company. It was more of a great idea, you know, we can build it for a small population and that's it tough a scenario. So the the
Martin Tobias (03:42)
so let
let's go back a little bit, drill down a little bit more on that. I I think it what I didn't say it clearly, but your main fund invests in things that are dealing with neurodivergent t t type things. And initially this idea was what came from the the fact that for people with autism or many brain illnesses
They had a much harder time with medication compliance than traditional patients. So they started there. There was an intersection between just medication compliance and your core thesis. That that's how it started.
Mahesh Narayanan (04:17)
Right.
Right. So I ev even the the thesis, I Novation's thesis is much broader, but at that time I was actually with Autism Impact Fund and their thesis is very much right.
Martin Tobias (04:25)
Autism impact. Okay. So you started as
autism impact. You found a need that was specific to autism, but then you said maybe this could be bigger.
Mahesh Narayanan (04:34)
Bigger, exactly. I I I saw the potential for it to be bigger because at that point it was you know, it was still focused just on autism and other types of, you know, intellectually disabled individuals. And so we wanted to
Martin Tobias (04:43)
And and with Justin
w was his personal problem with an autism relative as well or?
Mahesh Narayanan (04:51)
It was, yeah. I believe it was not an autistic individual, but it he was believe neurodiverse. And th that was part of the medication that he was on and that was the overdose there. And that's pretty much what ca caused
Martin Tobias (05:00)
The overdose right. Okay.
Mahesh Narayanan (05:03)
him to kind of get into this section where we can manage it better, document it better, have a little bit more control of it. And that was the the main idea that came in. At that point he didn't even have a box. He he was still designing
Martin Tobias (05:14)
Right.
Mahesh Narayanan (05:15)
what that should even look like. Everything was pretty much in his head.
Martin Tobias (05:18)
So so you worked with them for about a year and when you decided in May of twenty two to write the check from your fund, how you you had gotten them to know a little bit, but how what what did they get? Did they have the box done? Did they have any customers? They I think I seem to remember they had signed some senior care things. So they had gone a little bit from just the medication compliance for neurodivergence to a slightly bigger market and had a finished product. Is that about it?
Mahesh Narayanan (05:43)
Correct.
So exactly. So we had at that point he was one of the first cohorts. So as part of my involvement with working with the autistic community, I also helped develop the fox first accelerator for neurodaverage and technologies, under a demon gentleman named Dan Feschback. And so Justin was one of the part of that first cohort. So I was able to bring him into that cohort and said, Hey, they th this is what we need to do because
You have an idea, but we need to accelerate this a little bit more and get to a point where you can actually be fundable. And so as part of that, we helped him get in a lot of pilot studies. And so we were able to get in front of healthcare systems, we were able to get in other you know, long-term care facilities, geriatric care facilities. So outside of what he knew best, we were able to push him into other areas, and that helped him validate a lot of what we knew could be the potential, because the community baseline.
of compliance went from almost thirty, maybe forty percent in those clinics to eighty, ninety percent, which is unheard of when it comes to compliance of medication. And so it it worked incredibly well. And obviously again these are populations that don't want to take medication, right? So to get them to a comply eighty percent of the time is is you know is significant behavior change and that proved what this could do for me as an investor. Say okay that it's a safe
I can you know we had no overdoses and we have higher compliance, like th this is gonna really change how we manage care within these type of facilities. So that was a big breaker for me in terms of what changed my mind from saying, okay, this is just a good idea to this is now an investable idea. the other part of it is between twenty-two and end of twenty twenty-two, the the pilot started to pay. So he was able to convert the unpaid pilots.
to paid pilots and then eventually to paid customers. And so he started to sign a lot of those. and I think when I approached you, Martin, was when he converted his first pay unpaid pilot to a paid pilot. And then said, Hey, now we have some revenue. that's when I reached out to you and said, Hey, this this company can go really fast if if you really you know push the the button here because now people are paying and I know I can see the potential of them paying a lot more than what they're doing right now.
And so once he's got the first customer, paying customer from a unpaid beta to beta, that's when I reached out and said, Okay, now now I'm I'm ready to make that first investment.
Martin Tobias (08:09)
And and and I'm and I'm glad you did and and that is the right time I would have wanted to see a real customer and they I was I think it was one customer from maybe a hundred thousand dollar contract or something very small like that.
Mahesh Narayanan (08:20)
Exactly. Exactly.
Martin Tobias (08:22)
but that was amazing. But so the way I I wanted to go back and you only wrote like a hundred thousand dollar check or why didn't you
i there was like fifty thousand dollars of the check that I wrote, but why didn't you write that fifty thousand were you j looking for additional investors or was your fund not yet raised yet, or was there a capital issue with how much money you put in at that time, or how did you size your bet into improve on?
Mahesh Narayanan (08:50)
Yeah. So th there are two factors to that. one was that it was a small round to begin with. It was it was only like a one
Martin Tobias (08:55)
It was, yeah.
Mahesh Narayanan (08:56)
round. and so there wasn't and he was able to bring in quite a lot of capital. So there wasn't much space. So th the hundred K that you know I brought to the table, I think that we both split was was pretty much the final hundred K. So he didn't want to take more than that. So that
Martin Tobias (09:08)
Got it.
Mahesh Narayanan (09:09)
capped fifty K. but I did wanna you know and at that point was I was also w when I did my first closing. So the money on my end was also
just coming in from a fund. And so it I worked out on both sides. That I was probably the the biggest check I could have written at that point. And it was also the only
Martin Tobias (09:24)
Okay.
Mahesh Narayanan (09:25)
really needed at that point. So it worked out for both sides to to close out that round.
Martin Tobias (09:30)
All right. great. So you had worked with him for quite a while. He had gotten to the port where you thought it was investable because he'd closed a customer. I got happy. I I remember I sent you like sixteen questions and you asked asked them very quickly. My process was a little bit faster. I was sort of riding a little bit on on your diligence. But then ta let's tick go into the seed round, which was a a little bit
Later. I agreed with you. There was lots of promise they were going into the right senior care market. I think I sent it to Abby Levy over at Primetime Ventures. She's Yeah, I like the senior care market. This if it if it gets validated, it was a little too early for them. But you know, then you get into the seed problem where it it they went out to raise two million. I think they raised 1.5, and it took maybe six or seven months. It was really hard. We made a lot of introductions. what happened?
with the seed, you and I were both still convinced but it was taking a little bit longer, or what was your take on h why it was hard for them to raise the next round?
Mahesh Narayanan (10:32)
Yeah, absolutely. And and I think you know they they did a good thing in that they didn't they initially had a much larger round they wanted to raise. They wanted to raise f three million. and then
Martin Tobias (10:43)
I remember.
Mahesh Narayanan (10:44)
and then we convinced them, hey, look, it the environment stuff, but also you don't have enough traction to go raise three million at a valuation where we're not all getting other down to nothing. 'cause you know, at that point the pre money, you know, was maybe ten, eleven, something like that. So it didn't make sense for them to go raise such a large round.
you know at at such a low valuation. And so we decided to split that round into 1.5 for seed one and then 1.5 for seed two. and so the first 1.5, the the big component there was yes, they started having paying customers, but it was limited to one state. And the reason for that is they had to go state by state in order to actually get an approval
Martin Tobias (11:23)
regulatory.
Mahesh Narayanan (11:25)
in order to use this device in each of those states and so
That part took Justin probably around eight to t twelve months to crack because he was cut he was trying to do it himself. And then he did the smart thing because when he once he raised a little bit of capital, he went and hired someone that knew how to do it well. And so the second part of that went much faster. But the first part was him pretty much going state by state, knocking on the CMS doors and saying, Hey, I I I need to get this device into your clinic. Can I get the approval for it? And then took like, you know, six months per se to do it.
So part of that was that struggle of getting state by state. But once they figured out what they had to do, how to submit, how quickly they can submit, they went from like two states in like a matter of twelve months to almost thirty states in the next twelve months. 'cause they had already, you know, placed all their the documents in place and then they slowly each of the states started to approve once they saw that a couple of other ones have also approved. And so that the first state took them the longest to convince and the thing was Massachusetts.
Once they got that done, they were able to slowly get through the rest of the States and quickly cover, you know, all the smaller and larger regions. So tha that was why they were struggling, is 'cause it just took them it it was B to B and so it was taking them a while to sell, but once they k knew how to sell it, then then it the ball started to roll.
Martin Tobias (12:39)
But they
but they were selling to senior carers, which was an evolution from when when you originally invested. But now in the last sort of twelve to sixteen months, they've been able to sell entire statewide compliance software systems for Medicaid medicine compliance that may or may not have the the box, but it's sort of a a statewide software system. in that is
They they got to there by saying we can n we just think there's an they how did they get to there from senior care? That's my question.
Mahesh Narayanan (13:15)
Yeah.
And and and part of that discussion came during when they started to hit the the the the doors within CMS. 'Cause initially to your point it was it was a hardware software combination. And
Martin Tobias (13:25)
Hardware software
combination to a s to a facility.
Mahesh Narayanan (13:28)
To a facility, right. And and but someone had to pay for it. And initially the facilities did not have enough money to pay for it. So then they
Martin Tobias (13:35)
Budget.
Mahesh Narayanan (13:36)
said, okay, can we get this covered by insurance so that they can afford it per patient? And so then they started to talk to CMS. And CMS was more interested in the software side of compliance than the hardware side of compliance. And so that conversation started to evolve within when every state came to say, Hey, look, you have such great compliance measures and and your your your patients are doing really well underneath.
you know your system, it's great to have the medication when you're there in person, but we would like to roll this out to as many systems as we can that we're covering. Can you just build a software for that? Right. And and so that that became the the the deeper conversation that they somewhat pivoted in the way the software works from just a compliance of their medical device issue to compliance for medication in general issue. And so they were able to really take this to any system that was looking at giving medication
And then doing it in a room by room or health system by health system. And that's that's how they really started to roll this out across all the states. And again, that that was not a revenue stream or even a a product roadmap that was there. It was just what one of the
Martin Tobias (14:38)
From the beginning.
Mahesh Narayanan (14:39)
one of their customers asked for it and they said, you know what, this looks like a good idea. They're like, Are you willing to pay for it? And CMS said, Yes, we will pay for this. And they pivoted and kind of expanded that offering once one of the customers asked to actually asked them to build that out for them.
Martin Tobias (14:52)
So thanks for going through all of that. And you know, what the the big opportunities are now I think it's also driven a little bit by what's happening in some of these states where they're talking about fraudulent Medicaid or re treatments and stuff like that. States are starting to say, Well, what kind of software can we put in place for compliance to make sure that there is less risk of fraud? So th there's certainly been a tailwind that didn't
wasn't there when you invested in the company, which I think is driving some of these state things. But that's an interesting story of you you thought you you were initially interested in medication for neurodivergent patients, turned into senior care, then turned into statewide compliance stuff without any hardware at all. and that is oftentimes in venture, what happens is different pivots come along opportunistically.
I want to take you back to the information state that you had when you met Justin and the original founder and you decided to write that first check. it's clear that he is the kind of person who's been able to roll and grow as the opportunity gets there, but what gave you the confidence that he was that that he would be that kind of guy before it turned out that way?
Mahesh Narayanan (16:05)
I mean from day one when I met him, he was so driven by trying to avoid what happened to his brother, to someone else. He was gonna
Martin Tobias (16:13)
The personal motivation.
Mahesh Narayanan (16:15)
the portion of motivation and and it from day one I knew he was gonna make this happen whether I'm there or not, or anyone else is there or not. He he was so driven, he knew that this is something that obviously it impacted him deeply, both emotionally and and and physically. And so i you know, just having lost his his brother for it.
And so I I just had conviction from day one when spoke to him that he was determined to make this happen either way. And so it was more of, you know, do I jump on for the ride or you know, do I sit in the sidelines and watch him? And and so that that was part of the conviction. And then I think as he grew, he he was so coachable. I I think that was the second part of it, is he
Martin Tobias (16:52)
He was coachable too, okay.
Mahesh Narayanan (16:54)
he was very coachable. If it had when any of us tell him, hey, like this might not be your strength, let's find someone else who can do this.
within a day or two he'd come back with five candidates saying, Understood, I got five people. Who do you think I should hire? Right. So he he was very motivated to fill whatever gaps he has in his team to make sure the company moves forward. And he and he's willing to you know understand what his limitations are. Because again he was selling, he was building, he was doing everything. And and we told him, look, you cannot do everything. You're there to be the high vision, you're strategic, that's where you need to be, get people to build, get people to sell.
Again, overnight he he changed his entire team from a one person, him running everything, to hiring two or three people, pulling the product and get getting people to to go sell it for him. All of that was again I wouldn't say it was just me. So many of us gave him those advice and and and really pushed him forward. But he was willing to take what made the most sense and then, you know, implemented that as soon as possible. And even that even from earlier on, th that was part of his basic the second we give him some advice, he would ingest it and then he would act on it.
overnight and and that that was something
Martin Tobias (18:00)
Right.
Mahesh Narayanan (18:01)
that really drove how people discomfort.
Martin Tobias (18:04)
You you g you got some proof of that even before you had the right to check and you saw it sort of compound when you said maybe senior care is bigger opportunity than just neurodivergent and then then maybe okay, you took you got yourself compliant in one state, but it's time to get out of the single man thing here and compound to get multiple states and he did it
t very, very quickly. yeah, that th that is something you can learn about founders even before is how they take feedback and and how they respond to opportunities that that could seem like diversion diversions. You know
Mahesh Narayanan (18:42)
Yeah, absolutely.
And again, of not just for him, but I feel like most of the successful founders it it's not that every advice is good advice, but they're able to digest it and figure out what part of that makes w works for them, what makes sense for them, and then ignore the rest of the noise and then you know be able to execute on top of it. So so I think he he does that very well and he has a lot of soundboards. He uses a lot of people to kind of, you know, figure out what makes the most sense before he just makes a decision. So he he listens really well and then he executes quickly.
and that's a big part of it is that when it it's when when something's going wrong, he knows to jump in and fix it and something's going right, he knows to step it out
Martin Tobias (19:15)
Something going on to be able to do that basis and something going right else.
Mahesh Narayanan (19:19)
of the way and just let it run with whoever's running it. And so th those are very key components of making a good CEO.
Martin Tobias (19:24)
He
it it also seems like when when the market is pulling you in a way that might be a little different than your current plan, you pay attention to it. And the fact that,
Mahesh Narayanan (19:34)
Absolutely.
Martin Tobias (19:35)
you know, this one state was willing to prepay a three year contract, like he was smart enough to be a CEO and go, Well, that's not exactly the car product I built, but somebody's gonna prepay me for three years. Maybe I should think about that. There there are actually CEOs who would have said no to that deal.
Mahesh Narayanan (19:49)
Yeah, I and you know, th that was that was a multimillion
dollar deal. That was a multimillion dollar deal. And it's like, hey, like I I mean and and very much was a gamble, right? After that one state. So he was taking a big gamble
Martin Tobias (20:00)
No no.
Mahesh Narayanan (20:01)
to pay you know, build that for Massachusetts. But it he built it so well that you know it other states could not say no.
I think, you know, a key component is that he went started to look at other states and said, Hey, if I build this, you know, what else would you like? Because it's what I'm doing for Massachusetts, but it might not be the best for California, it might be the best for
Martin Tobias (20:16)
Right.
Mahesh Narayanan (20:17)
Arizona. And so he went and listened to those states as well before he started building the product and then build something that could be he can build it one time and then give it to everyone versus keep building it over and over. Because that was another advice that I remember giving him is d don't build per customer or you're just gonna get in this s you know, infinite loop of just
building over and over and over and that's gonna just you know kill your margins. And so he he took that into account and said, Okay, you know what, I'll build something a little bit more broad that others can use and then we'll customize it, you know, if needed, but really just go after it as broad as possible. So he built that really well for all the states.
Martin Tobias (20:51)
Yeah. I think I talked to him about that too. And that is a common thing. You know, when customers are pulling different feature sets out of you, one of the things you don't want to become is a custom software development, basically a consulting shop. And
Mahesh Narayanan (21:06)
Right.
Martin Tobias (21:06)
if the things they want to pull out to you, you have the potential to resell to other people at very low cost.
then they're valuable things to do. And I I give that advice all the time too. I I see lots of people coming in and saying, these customers want this and I just have to do a bunch of cluster custom cloud code agents or something. And I'm like, well what what's the next customer want? Well different custom cloud code agents. And I go, great. You just created a consulting company. That's not scalable.
Mahesh Narayanan (21:34)
Exactly. Exactly. That this is not that's not scalable at all. So yeah.
Martin Tobias (21:38)
but thinking about it to be scalable and and and and having talked to enough customers to
verify opportunities and building it that way with the correct data model that's exactly the right that's the difference of building a software company versus consulting company. I worry there are many companies today that turn out to be consulting companies. So let me this wasn't necessarily a case of improve on, but I did want to ask you since you do invest a little more in a little bit deeper tech, maybe medical devices, things with science risk. In this case it was very much
I think an execution risk because he built different software and different I mean there's a little bit of hardware execution, but not that that much. And it turns out
Mahesh Narayanan (22:14)
Right.
Martin Tobias (22:15)
you got a great jockey that could pivot and and move things along. So it was very, very underwriting the jockey. When you're faced with something which is a little bit more deep tech that a little bit more science y, that has either FDA regulation or
other risk. How do you underwrite something that's a little bit deeper tech or has a lot more science? What percentage of your weight is cause in this case I think it was very heavily weighted on the founder and the science of the thing was was not the gating factor. I mean there were s a few maybe HIPAA compliance things on on the software, but th n it wasn't hard tech. W when it gets into hard tech, how do you think what do you add to
Mahesh Narayanan (22:57)
absolutely
Martin Tobias (23:00)
your
decision criteria of making a bet.
Mahesh Narayanan (23:03)
Absolutely. so so yeah, very much to your point. I would say seventy percent of my investment decision on this part was probably founder and team led. versus you know, if it was a little bit more deep tech, a bit more hard life sciences, I would say, you know, about thirty percent comes down to the team, thirty percent comes down to IP, and then forty percent comes down to data. So that's still an emphasis on the team, but I am looking at how do you protect this? I I mean, you know, for
in in in in pro one or other in a software focused case, you know, protection is pretty much just your your your moat is how big of the market you're gonna capture and kind of keep and build.
Martin Tobias (23:39)
Execution. Yeah.
Mahesh Narayanan (23:40)
Right. It's all about execution. Whereas in in hard sciences, there's there's a big component of that being in it within your the the the IP and and what's being built around the the you know the patents and so that becomes a big component. And the second part of it is
publications as well as you know who else has validated this, right? So a big we we see so much science. It's like, we've done it. I'm all right, well no one else has done it. So I don't I can't believe you yet. Someone else needs to validate this outside of what they're still.
Martin Tobias (24:09)
Science has to be replicated.
Mahesh Narayanan (24:11)
Right. And so it's re replicatable, publishable. Someone else has gone through it and seen that this actually works. That's a you know a high value. and and then certainly, you know, the type of data that they've generated, you know, is is it only on animals? Is is it in multiple animal models? Is it you know
have you manufactured this in a GNP compliance versus just say you know non-GMP compliance? So all those things come come into a factor when we're building out more hard life science investments because those those factors really play a role. And I would certain certainly think if even from a regulatory compliance, so certainly you know, Improvon also had regulatory compliance to be worried about. So that was th that played a factor. But
I still want understand, you know, how much is the FTA going to get involved? Are we going to go to them every year or
Martin Tobias (24:58)
Yeah.
Mahesh Narayanan (24:58)
are you know are we going to just get them one submission? They you know it's a five ten K, you got approved, and then you have to worry don't have to worry about it again. How often do you have to interact with them becomes another factor as well, because the more you interact with them, the more expensive your trials are gonna be. And so you have to meet with them three times, then the cost is like thirty times. and so we're
Martin Tobias (25:16)
Yeah, yeah.
Mahesh Narayanan (25:17)
we're trying to you know also gauge that as to in how straightforward is this path that we avoid
having to go through the FDA over and over again because the more we do that, the more we're gonna end up spending on the on the research.
Martin Tobias (25:29)
Yeah. I think in in Improvan's case they had to prove that their data was HIPAA compliant for from a security perspective, but that's a one time thing.
Mahesh Narayanan (25:37)
It's not.
Martin Tobias (25:38)
You don't have to go through any special FDA approval and you just have to get a auditor to certify it or something.
Mahesh Narayanan (25:44)
Exactly. And and and what they did is that they did the smart thing and just got a provider that's already compliant. So that way they didn't have to get themselves HIPAA compliant. They just said everything's
Martin Tobias (25:52)
Yeah.
Mahesh Narayanan (25:52)
being stored over there and they're already APA compliant so we already deal with it. Right. And
Martin Tobias (25:55)
Exactly. You just store your
data over there and it's all fine. Yeah, you shortcut
Mahesh Narayanan (25:59)
Exactly. And so
they they even circumvented that part of it to go straight to the HIPAA compliance.
Martin Tobias (26:02)
Okay.
Mahesh Narayanan (26:03)
they just kinda like third party that as well and made it cheaper for them.
Martin Tobias (26:07)
Well,
thanks for explaining. I yeah, I mean I I I I'm glad somebody's doing deep tech. talk to Arcady Kulnik, who I think you know as well he does that. I don't do it.
Mahesh Narayanan (26:15)
That's all.
Martin Tobias (26:16)
It's too it's it's completely different decision framework because the weights and balances and how to pick them, very different. So let's go back to improve on and if you had to s you said in that case the founder was about seventy percent and you mentioned the fact that he had
a personal stake in his original problem and then you'd work with him and seen him deliver and be coachable and things like that. What would would those be the top two replicatable rules or what would be the one or two or three sort of replicatable things that you would be looking for to find the next bet like improve on health that you were going to be using to look at the next kind of companies or early like that?
Mahesh Narayanan (26:57)
Yeah, I mean I I think at this point we've gone into a pretty nice rhythm of the type of companies that we like investing in. And so usually
Martin Tobias (27:03)
Okay.
Mahesh Narayanan (27:04)
that there are two factors that I'm always looking at, especially in the earlier on, is is it not necessarily a platform technology, but can we expand this to well beyond just the market that was built for? That's a very big part of it. If I if I don't see it being able to just be, you know, take it and just plug it into another market that I know it should be working on.
then you know I it's not something that we really look into because if it then it oftentimes that means the market's just too niche and and there aren't other markets we can expand into.
Martin Tobias (27:32)
Yeah. Yeah.
Mahesh Narayanan (27:34)
The the second part of it certainly is you know how how much do I believe that this founder is not going to give up on this idea, even if I do. Right. And and you know I I really dig them on that to really figure out, you know, it what drives them, what motivates them, what makes them up in the morning, every n every morning to just actually work on this.
And it it doesn't it it cannot be money motivated, it cannot be, you know, fame motivated, you know, th those are things that are gonna go away overnight for for most founders, right? So so th so we we really dig into what really ticks this founder so that they'll continue building this no matter what. and then the other aspect of it is
Martin Tobias (28:11)
Those two things.
Mahesh Narayanan (28:12)
sorry?
Martin Tobias (28:13)
Yeah. Is there an last third thing or yeah?
Mahesh Narayanan (28:16)
Yeah. Well w the last thing I would I would be is on the coachability, right? Like how how much are they willing to
Martin Tobias (28:20)
Coachability.
Mahesh Narayanan (28:20)
listen and actually again they they don't have to agree with everything I say and and oftentimes I'm not saying that they they even do. But as long as they're willing to listen and say, okay, you what, let me think about it and then let me come back with something better. That's really all I'm looking for from founders. And so and we we can pretty much determine all three of these things in in the first meeting. Like it's really not hard for
Martin Tobias (28:41)
Yeah.
Mahesh Narayanan (28:42)
most investors to figure this out. Is are are they willing to listen?
Are are they you know, do they have a motivation and is this a market that's worth investing in? Those are things that we can pretty much you know decipher right away.
Martin Tobias (28:52)
I like I like those three things. Mike Ma mentioned a lot about coachability. He's on that too. I I I'm a little bit on the fence on coachability, but what because you know I've seen some of my best founders just ignore the fuck out of me and just go crush it without me. but
what I definitely want is to see the way I put it is I want to see a curiosity for my comments and an a a respect for being challenged.
because like if I ask a founder a little bit of a hard question and they're like, that's stupid, that's just terrible like if if we can't communicate and and and about hard things in a in a productive way, this is a 10 year relationship. Like it's not gonna work.
Mahesh Narayanan (29:34)
So
Martin Tobias (29:35)
that doesn't mean I'm smarter than them, but that means that he's at least curious about taking input from outside and then
I I I agree with you. They don't have to do what I tell them to do, but they have to be curious and, you know, want to discover the truth be truth seeking.
Mahesh Narayanan (29:52)
Exactly, exactly.
Martin Tobias (29:53)
right? And and you wanna some proof of that. You don't you don't want them to be dismissive of of of potential challenges in their business. uncurious. That that's the way I put it. That the the the founders that are like uncurious about things,
I I have a real problem with.
Mahesh Narayanan (30:09)
Yeah. And and I feel like, you know, if if we point out a problem and then they don't come back to me with, hey, this is not a problem or I have a couple of solutions within like a week, that that that that's a you know, that that's a deal breaker for me. It's like look, I exactly. It's like
Martin Tobias (30:22)
It's it's a big flag. It's a big flag. Yeah.
Mahesh Narayanan (30:24)
I've told you something, at least tell me, you know, what the the the end result was after you discussed it internally. And and if you don't, that tells me that you often did not discuss it internally, just dismissed what I said.
Martin Tobias (30:35)
Yeah, yeah. You're
the you you you just dismissed it and moved on to something else without a thoughtful response.
Mahesh Narayanan (30:41)
Exactly, exactly.
Martin Tobias (30:42)
okay. Well I'm excited to see how Improve On keeps going and to do some other investments with you. So if you find another good guy solving a personal problem in software, not hard tech, let me know. I just did a first close of my second fund and I'm gonna be writing five hundred thousand dollar checks in January.
Mahesh Narayanan (31:01)
Congratulations, that that's a big news. Amazing.
Martin Tobias (31:03)
It it is. All right.
Mahesh Narayanan (31:06)
Send a couple more couple more good ones your way there.
Martin Tobias (31:09)
All right, thanks for your time. I'll talk to you later.
Mahesh Narayanan (31:11)
Absolutely. Thanks so much Martin. Thanks for having me.