- 4 hours ago
Nisha Dua, cofounder and managing partner of BBG Ventures, sat down with Business Insider's Melia Russell to talk about seed investing in the age of AI.
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00:00Along with the Seed 100, we also published the Seed 40, a list that specifically highlights the top women investors.
00:07And today, I'm so excited to welcome a powerhouse from that list, Nisha Dua, managing partner and co-founder of
00:14BBG Ventures.
00:16BBG's focus is on what it calls underestimated entrepreneurs.
00:21Nisha's backed breakout companies like Spring Health, Zola, Starface, Topline Pro, and many others.
00:28Nisha, welcome to Business Insider's newsroom, and congrats for making the Seed 40 list.
00:33Hey, excited to be here. Thanks for having me.
00:35So, you know, we have heard a lot about AI, that it is like if you backed AI early, you
00:42saw your ranking go up on this list.
00:44And what I love about your story is, like, you are not a consensus investor and, in fact, maybe have,
00:50like, a healthy AI skepticism.
00:53Why is that?
00:55Skepticism is an interesting way of putting it.
00:57I mean, maybe what I would back up and say is we're not a cycle fund.
01:01So we've been investing since 2014.
01:03We've seen mobile.
01:05We've seen SaaS.
01:06We've seen Web3 and the NFT craze, and now we're in AI.
01:09And so our thesis is really about, you know, how is American behavior shifting?
01:15What are the preferences, priorities, and behaviors of Americans?
01:18But if you think about every platform shift and those categories roughly mirror all the platform shifts, capital converges, right?
01:26So capital goes in the same direction.
01:28It goes to the same founder archetypes, the same networks, and the same pattern matching.
01:33And we're seeing that play out right now.
01:35I think the top 10 deals last year got, like, 40 percent of venture dollars.
01:40Fifty-four percent of deals were done in San Francisco.
01:42I think you and Ben were talking about some of these themes before.
01:45But, you know, if we have a sense of, let's call it the commodity middle, most funds putting in their
01:51dollars into horizontal AI, point solutions, wrappers, then where is the alpha?
01:57And so we've really tried to stay, I think, on the edges of the innovation spectrum.
02:02And you're not saying no AI in your BBG vendor.
02:06Your LPs would probably take issue with that if so.
02:08I mean, maybe.
02:09It has a place in your portfolio.
02:11Like, can you tell me a little bit more about what is the investment strategy?
02:14So we call it the barbell.
02:16And on one end, we talk about investing in companies that drive deep technology leverage.
02:22So, yes, AI or software 3.0, which is what we're all going to start calling it.
02:26Oh, I didn't know that.
02:27Okay, good to know.
02:28But, you know, how are those companies driving net new behavior or new value pools?
02:33These companies are building end-to-end solutions.
02:36They're building a new system of action, right, taking insight to action.
02:40And they're using institutional knowledge or proprietary knowledge to compound.
02:45But that stays away from that middle set of companies that I was describing.
02:49And all the way on the other end, we have companies that we call deep humanity companies.
02:54So what are the emotional, social, or physical needs that still need to be met despite AI or maybe right
03:01now even because of it?
03:02And that could be companies in women's sports, for example.
03:06It could be organic baby formula where consumers have not had another option in 40 years.
03:12Or it could be in beauty.
03:13So a great example of that is our company Starface.
03:17Starface took the age-old category of acne and said, let's turn a category of, you know, historically shame, embarrassment
03:25into one of joy.
03:26And so you see that today in every street corner where you see teenagers.
03:30They're rocking gold stars over their acne and they are turning a moment of flaw.
03:35I've literally seen these and I had no idea what they were.
03:37Justin Bieber's wearing them.
03:39The basketball players are wearing them.
03:40Everyone's wearing them.
03:41And they just did a big $105 million minority equity round.
03:46And you can really see the power of, I think in that case, the moat is community and identity and
03:53taste.
03:54And so I think we're going to see even more of those companies come to fore.
03:57Yeah.
03:58I hear that sometimes that like in the age of AI, taste is one of the most valuable skill sets
04:04you can have and you can build anything, I guess.
04:07So in that sea of founders looking for capital right now and in your inbox, what are you looking for?
04:15What catches your attention right now?
04:17Yeah.
04:18Well, we have a hypothesis around what we call the polycultural future of America.
04:21So we've been tracking the passage of the monoculture to the polyculture.
04:27And we've done some real proprietary research across 2,000 Americans to say, like, how do you view identity?
04:34And we think that identity today is this like multifaceted concept.
04:39It's dynamic.
04:40It's fluid.
04:41It's moving.
04:41That can cross age, race, gender, socioeconomic status.
04:45And that's driving new demand across every fundamental need state.
04:49So health, work, financial security, climate, consumer.
04:52But that means you need founders who have really been inside those problems.
04:57So we call that lived experience.
04:58So when you're in Silicon Valley, you'll classically hear the words earned insight.
05:03Traditionally, that means learned experience.
05:04Like, where did you work?
05:05What logos have you collected along the way?
05:08But we think that two things matter, lived and learned experience.
05:11So a really great example of that is a founder in our portfolio, April Coe.
05:16So she is the co-founder and CEO of Spring Health.
05:20I think youngest unicorn founder might be, kind of female founder, might be her claim to fame.
05:26But I think her fame is much bigger because that company today covers 170 million lives for employer benefits for
05:34mental health.
05:35But she founded the company because she struggled with her own mental health.
05:39She struggled to find a therapist and she watched her roommates do the same.
05:43And so when it comes to therapy, that's your biggest friction point, is finding a therapist.
05:48And that's where you opt out of care.
05:50So she took her own experiences and she teamed up with Adam, who wrote his Ph.D. on how to
05:57use machine learning and AI to connect patients with the right therapists for them.
06:01And today they're valued at over $3 billion and they cover hundreds of millions of lives to deliver mental health
06:07care.
06:08So you're seeing there the partnership between that lived experience and maybe the Ivy League degree with the ML, you
06:15know, undergrad.
06:16But no, that's interesting.
06:18It reminds me of what Bradley was saying about not just working in kitchens, but he expressed his interest in
06:26tech-enabled wellness.
06:28Like there are so many corners of the tech ecosystem right now that aren't Chat2BT wrappers, but that like meet
06:36people in their lives.
06:38Yeah, I think that's exactly right.
06:40And when you look at these founders with lived experience, they're often coming from outlier backgrounds.
06:45They weren't necessarily part of these Silicon Valley networks.
06:49Yes, some of them went to Ivy League schools.
06:50But, you know, like me and my partner, you know, my partner is a college dropout.
06:54I grew up in a small country town in Australia.
06:57My parents are Indian immigrants.
06:58We have also broken through some of those networks to build something different with BBG Ventures.
07:04And I think what all of these founders have in common is a desire to move the world forward.
07:09And so what we like to say is we're really investing at this intersection of, I think, world-changing ambition
07:16and humility.
07:17Because I think when you've been through the problem, you have this real reverence for what people have gone through.
07:22Absolutely.
07:22So, you know, Ben and I were talking a little earlier about how for founders going out to raise funding
07:29right now,
07:29there's a little bit of a haves and have-nots situation, right?
07:34If you are like, if you've had the pixie dust sprinkled on you, you can go raise back-to-back
07:40rounds of financing from Sand Hill Road, you know, offices.
07:44And it leaves a lot of founders kind of fighting for scraps.
07:50And what's interesting to me about that is the same thing is kind of happening in the venture ecosystem,
07:56where you have these major marquee-name firms gobbling up the lion's share of investment dollars, LP money.
08:08And it's, in recent years, become more and more difficult for first-time fundraisers, emerging managers,
08:16to raise their first and subsequent funds.
08:19You have lived this over the last 10 years.
08:22Like, are you seeing that binary play out in, you know, among your peer set?
08:27Yeah.
08:28Yeah.
08:28I think it's harder than ever to raise a fund as an emerging manager.
08:31Okay.
08:32And we see this all the time.
08:34It's taking longer.
08:35You know, and you made the, you already noted this.
08:38I think the data is something like in 2024, 20 funds took 60% of LP dollars for new fundraisers.
08:45And most of those funds were over $500 million.
08:47And I think that's echoing some of the themes we've already talked about, which is capital converges.
08:53It's converging around AI right now.
08:55And so if you're an LP, you feel like, I can get a pretty fair shot of the game if
09:00I'm in these mega funds.
09:01Because they're playing to be in all the companies, right?
09:04It's worse for them to miss the winner rather than make sure they just back the winner.
09:09For a smaller fund, the calculus is different, right?
09:12You have smaller AUM.
09:14But I think, you know, the other piece of this, and I talked about this, is not just convergence around
09:20AI, but what a platform shift drives, which is convergence around the same networks.
09:25Now, an LP recently said in a publication, you know, after the hubris of 21 and 22, there was this
09:32flight to quality.
09:33Yes.
09:34I think that can be a misnomer.
09:36What I would say is it's actually a flight to what I know and what has worked before.
09:41And so the LPs who think differently about emerging managers are really thinking about, well, firstly, how do I diversify
09:49my own portfolio and where do I look that's different to do that?
09:53So if capital is converging in one place and if, as Salil said, we're in a bubble and we need
10:01to diversify, who are the managers that are going to find alpha and look for something different out of the
10:06norm?
10:06Well, that's emerging managers, right? But it's particularly emerging managers who aren't just spin outs.
10:11It's new team ups and it's new entrants to VC because those people are hustling harder and I think they're
10:18looking at different communities and networks to find new founders.
10:21So it is harder, but I think they're a great bet to add to your portfolio.
10:26I love that. Any advice right now for, you know, some of these companies are maturing.
10:33We might see more people spin out to raise their own funds.
10:37They're walking into a hostile market.
10:40Maybe not if you're like leaving OpenAI to start a fund, but any advice for aspiring fundraisers right now?
10:46Well, I should do my plug. I love LPs. I believe they're hostile.
10:51No, look, I think you have to have a real point of view and this is what we say to
10:55founders as well.
10:55It's like, where do you think the world is going and how are you going to change that part of
11:00the world or how are your investments going to change that part of the world?
11:03Right. And for us, it's this polycultural thesis and the fact that founders with lived experience who have that different
11:10shared identity state can can really make a dent in any market they go after.
11:15But what where I see most emerging managers go wrong is that they don't articulate a clear thesis and a
11:21clear reason that they have differentiated access.
11:24So, you know, I meet a lot of people and I can tell you everyone wants to start a fund.
11:27It's it's really fun to go and invest.
11:30But, you know, you've got to remember as well.
11:32I think the third thing is that you're a money manager and so you have to be really great at
11:35portfolio construction and and owning a portfolio.
11:38And so those things take time as well and you should really arrive in the market, I think, with a
11:43clear point of view of of how you can drive returns.
11:46Yeah. So there's, you know, one side of this coin is that what you're backing might change or how you
11:53think about constructing your portfolio.
11:55But also I understand that like the day to day life of a VC is also changing because of AI
12:03and Ben shared a little bit about Salil's observations earlier.
12:06Are you using AI in your day to day work?
12:09I mean, it's completely changed the way I work.
12:10I would guess it's mandatory to some extent.
12:13Yeah. And I mean, it's fascinating to me that you have commencement speakers being booed right now for their commentary
12:18on AI, but it is truly shifting the way we're doing our work day to day.
12:24You know, I would say it affects every part of the stack from inbox triage to internal firm operations to
12:31how we do diligence.
12:32I mean, the way I think firms are going to start using associates and analysts is fundamentally shifting, which is
12:39a little scary.
12:40And I think we as an industry have some work to do to figure out how we're going to mentor
12:43young up and comers into the industry because Claude can do a lot of that work today.
12:49But, you know, I think what's interesting to me and what worries me is when I hear VCs saying, you
12:55know, I built an algorithm to try and predict or pattern match who will be the next unicorn because I
13:01think, you know, that's kind of a flawed strategy.
13:04We literally do a list like that.
13:06You guys should do that should be the next list and let's see how it goes.
13:10Right.
13:11But to me, that's how you miss alpha.
13:14Right.
13:14You're if you are going after the algorithmic pattern matching, what are the set of inputs that you have that
13:19is different?
13:20And so I think, you know, there's no replacement for judgment on top of that.
13:25And there's no replacement for being in person with a founder assessing some of the things that Bradley was talking
13:31about.
13:32Right.
13:32You know, and so we still think that that is really important.
13:37And if you look beyond the algorithm, you have to be in these outside communities.
13:41Right.
13:42These tinkerers who have really grabbed a hold of a problem who aren't just picking a tam off a spreadsheet
13:48and saying, I want to go and be a founder.
13:51And so I think those are some of the things that I still can't touch.
13:54But it is true that as a firm, you can do a lot more with a little today and it
13:59can impact sourcing.
14:01It can get you to people faster.
14:03So in many ways, I think, you know, VCs.
14:06Well, my VC is like a small business.
14:08I'm an emerging manager.
14:10It's it's as AI is to many small businesses today.
14:13I mean, it's a fundamental unlock in the productivity that you can achieve as a business.
14:18And that's really exciting.
14:19Thank you so much, Nisha, for being here today.
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