John Vrionis on his unusual approach to venture capital

Last year, John Vrionis, who was previously a partner at Lightspeed Venture Partners, launched Unusual Ventures together with Joyti Bansal, the founder of Lightspeed-backed AppDynamics, which was sold to Cisco for $3.7 billion in 2017.

Vrionis has an impressive track record leading investments in enterprise technologies. Besides AppDynamics, he led deals in Nicira, which sold to VMware for $1.26 billion in 2012, and MulesSoft, which went public in 2017 before Salesforce acquired it for $6.5 billion last year.

Vrionis and Bansal believe that VCs are increasingly investing in later-stage companies, while the seed-stage investors may not be equipped to help entrepreneurs during the first few years of a startup’s life.

With their Menlo Park, California-based firm, the partners set out to focus exclusively on early stage companies, offering founders not only funding, but also a lot of hands-on support and knowledge.

VCJ recently spoke with Vrionis. An edited transcript of the conversation follows:

Q: Tell us about your firm’s name? It’s unusual.

A: When we first started telling people about our initiatives, such as our Academy, where founders get weekly lectures from world-class experts on topics that are often challenging for startups, such as fundraising, people would tell us, “that’s unusual.”

Then we would explain our plan to support our portfolio companies through our Get Ahead Platform, where we would temporary put seasoned practitioners in areas such as sales development or technical recruiting on the startups’ staff, we would also hear “that’s unusual.”

VCJ Venture Unusual Ventures
John Vrionis. Archived photo from Lightspeed Venture Partners.

And then we would say that we are taking money only from endowments and nonprofits. That, too, was unusual.

We heard “that’s unusual” so many times that we decide to name our firm Unusual Ventures.

Q: Tell us about raising your first fund. You and Jyoti are well-known, could you have raised more than $160 million?

A: For a first-time fund, we had a lot of LP interest. In fact, we were over-committed in the first three weeks. But we took money almost exclusively from historically black colleges and other nonprofits, foundations, and endowments, so that limited our potential LP universe.

We likely will raise fund II within the next year.

Q: You brought on Andy Johns this year as a consumer partner. Will you hire more partners, perhaps to focus on other sectors?

A: We will continue to focus on enterprise and consumer for now. We will be adding enterprise and consumer partners, but our plan is to grow and promote these people from within our firm.

Q: Can you comment on the changing nature of seed and Series A financing.

A: Deals sizes are getting larger and larger. Venture capitalists want not only big valuations, but also to lock in management fees. What used to be a B round is now an A and what used to be A is now seed. We write checks anywhere from $1 million to $8 million. We are the new seed.

Our companies have not yet demonstrated traction, but this would have been called round A even a few years earlier. I had someone recently compare it to sizes in clothes. This person was the same physical size for the last 20 years.  She used to wear size eight, but now it is called size two.

Q: With the recent glut in VC funding, do you think some startups that take capital would be better off trying to go at it on their own?

A: Venture capital’s “grow or die” approach is not for every entrepreneurial endeavor. VC funding is meant for startups that want to scale very quickly, but very few businesses are that big in scope.

Q: Can you give me examples of companies who should not take VC financing?

A: Online retailers. Amazon just killed everyone in this space. Also, anything that’s capital intensive should probably be financed through debt. Though there are some exceptions, like Pelaton. They seem like an equipment company, but they are more of a subscription software business. Each additional subscriber pays $40 per month, but Pelaton’s expenses don’t go up.

Q: What is your outlook on the enterprise sector?

A: I am very bullish. There is a lot of innovation and big companies have money to spend. There is a lot of deal activity. Last year Red Hat was bought by IBM and MuleSoft was bought by Salesforce. And this year we will likely see the IPO of Slack.

Action Item: To connect with John Vrionis, he’s on LinkedIn at www.linkedin.com/in/johnvrionis.