4 Reason Immigrant Founders Outperform with Nitan Pachisia, of Unshackled Ventures #5
Nitin Pachisia @immigreating, co-founder and GP of Unshackled Ventures @UnshackledVC, talks about the underrated synergy of immigrant founder teams and why frugality generates ingenuity.
Links:
HBR: “Why Immigrants Are More Likely to Become Entrepreneurs”, “Why Diverse Teams are Smarter”
Axios: “Venture capital slowly seeps outside of Silicon Valley”
Unshackled team: Manan Mehta, Samala, Alexis Maciel, E’mani Davis
Unshackled Pitch link / Nitin’s calendar
Unshackled: The most common reasons we pass on companies
SHACK15 + SHACK15 CONVERSATIONS podcast
Brian Smiga: Hi, this is Brian Smiga, the SpeedyVC, and I'm interviewing Nitin Pachisia on democratic growth. Unshackled Ventures is a unique early stage venture firm that, as a growth investor, I think has a terrific edge. Nitin, do you want to tell us about Unshackled real quick?
Nitin Pachisia: Sure thing. Hi, Brian. Thanks for having me. Unshackled Ventures is a fund for immigrant founders in the US. We invest when founders are just starting their entrepreneurial journey, often incorporating companies with them, and we're on a mission to help immigrant founders succeed faster.
Brian Smiga: Yeah, so you're on a mission to do that, perhaps as immigrants yourselves, but I think even more importantly, there's outperformance baked in. I want you to unpack that for our audience because I'm totally with you on this. The beauty of investing in immigrants is that they outperform. Put a number behind that and then we'll unpack why they outperform.
Nitin Pachisia: I would say a combination of reasons. Immigrants historically have built great companies. The success is well documented in percentages of S&P 500 companies built by immigrants, unicorns built by immigrants. We've seen all that research. The unpacking of why that happens is not as well documented. It's a combination of three things.
One is a selection bias by itself. For you to be an immigrant to come to the US, you are raising your hand that, “I want to leave my home and I want to go to this country where anything is possible,” but you're also being selected, on the other hand, by a US school or a US employer when you're coming here. 7 billion people live outside the US and about a million and a half of those come to the US every year. That's a very, very high bar for someone to be selected. Add to that, when you leave the comfort of your home and come to a new country, you are making yourself a lot more determined, purposeful, gritty, and those things just become muscle memory. You don't have to learn and practice those things. It becomes your nature, which are great characteristics for an entrepreneur.
Third is, especially in tech and life sciences, which are higher education type of fields, you are highly qualified in your home country to come here. We're picking the best of the best, giving them the opportunity, layering up the environment that US offers and leveraging their grit and determination. Those combinations work beautifully in the entrepreneurial legal system, which is why we're so fortunate that we can invest behind a mission without being concessionary on the mission. Immigrants are great for business.
Brian Smiga: I couldn't agree with you more. In addition to both the selection that we talked about and the grit and determination, there is also a little bit of creativity and thinking outside the box— because you're now in a new culture where you're both uncomfortable and you've got to solve problems. Tell me a little bit about the creativity of immigrants in company formation and value creation.
Nitin Pachisia: Creativity kind of starts from the time you even think of, “I'm going to start a company.” You come to school, you're going through your degree, you graduate, you have a loan to pay, you're in a new country where you don't have a support system of your family house, family connections, so you learn from a very early point when you come here how to become resourceful. Resourceful by using your schools' resources, resourceful in terms of your networks that you build where you're working.
Add to that the need to stay frugal. Most immigrants coming to the US are not coming from billionaire families. They have to stay frugal because that's the only way possible to move forward. When as founders, we start thinking of, “I'm going to start a company,” you now start thinking, “Well, for a period of time I'm not going to be paid so I have to save, I have to become even more frugal.”
There's creativity in every one of these pieces. As we work with founders, we've now had the fortune of seeing these founders in action for nine years. We've seen ways that they've found to just stay in the game that we never thought were possible. They use their expertise, so if they're not able to raise capital because the product's not advanced, they'll use their expertise to lend their time for a little bit to get paid for services which they can use to keep the team intact while they're building the product. Then they go sell the product to the same customers who were paying for services.
Two, it's really easy for immigrants to think about, you know what, cost of living in San Francisco is really, really high. In my initial days, I can go live in Cleveland or Pittsburgh, maybe they went to school there, maybe there's some other connections, but I can reduce my cost and similarly to reduce the cost of my team if I'm hiring in places that are not as expensive as New York City or San Francisco. These are sort of easier examples, but if I just think through every portfolio company, the creative things they've done include not wasting their time on things that will not result in the ambition that they want to achieve.
Opportunity cost is a key factor that we see across most of the founders we work with. They have a high opportunity cost, not just in terms of the financial income that they would earn if they were working somewhere else, but the opportunity cost of their time. If I'm going to put four years of my life into setting something up, at least four years, I want that to be globally meaningful and impactful. That comes from a worldview, these founders are coming from all over the world, they have a broader view than you do if you just grow up in one ecosystem. It's a combination of a lot of these little things that leads to high ambition, high creativity, high determination, and therefore the disproportionate success that we've seen with immigrant founders.
Brian Smiga: Let's back up. Now I've got four criteria working for us. Highly selective, highly determined, creative out-of-the-box problem solvers, and frugal. Failure is not an option. God, who wouldn't want to back an entrepreneurial team that really brought that at the highest level? But now let's go to an example.
You've backed a lot of companies in your career. You're raising a new fund. I know your funds have performed well. I've guided you to meet some new limited partners. Happy to do that because I believe in what you're doing, obviously. Let's talk about an example. Who's the prototypical immigrant founder that you have backed that has helped you generate outperformance in your funds?
Nitin Pachisia: Let's take the example of a team of three international students that met at UC Berkeley. They were math experts coming from Israel, China, and Japan. Became friends at UC Berkeley and started building experiments at Berkeley Lab. We met them when they were walking around with some 3D printed pieces of, “here's what we can do to automate the home.” We got deeper into appreciating their unique way of thinking and then asked them, is this the best thing you can do with what you've built or do you think there's a higher value problem that can be solved with it? The curiosity was immediately evident in terms of, oh, we would love to talk to people in different industries to see what we can do with this innovation in other industries.
We invested before they started customer discovery. As they went into that, they saw a big need in healthcare for what they were building. In simple terms, the core innovation was mapping the indoor environments and mapping built environments without cameras. You were talking about creativity earlier. This is curiosity and creativity combined as we can take something we're really good at and apply it in a situation that we're not so good at, but we can learn quickly. Now this company is one of the best outcomes driven senior-care health providers.
Brian Smiga: Oh, tell us the name of the company.
Nitin Pachisia: Pine Park Health.
Brian Smiga: Okay. Pine Park Health. We're interested in the next round if we're so lucky to get invited. Thank you.
I think what's really interesting here is you have three immigrants from three different cultures and countries. I think there's something in that diversity, that collision of folks who are first of all, highly selected, determined, creative, out of the box, frugal, but then they come together from different cultures and there's got to be a one plus one plus one equals more than three in that equation. That's really interesting as well, the just diversity of thought, the diversity of culture coming in.
Nitin Pachisia: It is and that's what we embody in our team as well. If you look at our Unshackled team, no two people come from the same background, same culture.
Brian Smiga: Okay, what are the representative cultures? Go ahead, go for it.
Nitin Pachisia: I grew up in India, came here as a 25-year-old. My partner, Manan, was born here in Silicon Valley to Indian immigrant parents who immigrated in the seventies. His framework of thinking is an American Indian. Our team member, Samala, is an immigrant from the Philippines. Her parents immigrated. She was born here a year after the parents immigrated, but she grew up in the Filipino community in the US and she's deep in the Filipino community. Ale is a Mexican-Brazilian immigrant who grew up in San Jose and then Miami. E’mani is San Francisco native, a Black family, first in the family to go to college. We're about to bring on someone who won't disclose the details, but she's also an immigrant from a country that's not represented in these cultures.
It's not just the cultural diversity, it's more importantly what you said, diversity of thought, diversity of analytical frameworks. When any two of us are looking at an opportunity or a problem to solve for a portfolio company or problem to solve in immigration, we're not analyzing the same things the same way because that's redundancy. We're coming at it from different angles and that's additive, hence the one plus one plus one being more than three. Embodying that within the team makes it much easier for us to appreciate that in our portfolio companies as well. As they are growing, it's not just an immigrant founder and more immigrant founders, or an immigrant founder and American co-founder, it's more people of different backgrounds that can achieve a lot more by working together because they compliment each other a lot more versus bringing the same skills to the table.
Brian Smiga: I’m into that. Listeners, Pine Park Health is a great example of this. Three founders from three countries meeting at Berkeley, elevating their technology to solve a higher order problem in healthcare. Then Unshackled is a perfect example. You've got to meet Nitin and his team because you got six cultures there, building, sourcing early stage deep tech companies. You're raising your second fund, third fund? Tell us about that.
Nitin Pachisia: We're on our third fund and we're approaching final close in a few weeks on the third fund. We're very fortunate with the LP base that we've been able to build around including institutions and high net worth individuals, successful entrepreneurs and operators.
Brian Smiga: You've been through institutional diligence with folks, I won't mention their names, like fund to funds, et cetera.
Nitin Pachisia: Yes.
Brian Smiga: So, congratulations. I'm so glad and I don't know if you guys ever gather in an office or if you're distributed, but I'd like to come meet the whole team. I think I would come out smarter and deeper from meeting you all. It’s been great getting to know you, Nitin, so thank you.
Nitin Pachisia: Yeah. You're very welcome. We're all huddled at Shack 15 in San Francisco most of the time. One of the team members lives in Miami, but we huddle together every six weeks or so. Then the rest of the team is local here in the Bay Area. Whenever you're here next I'll host you at Shack 15 and you'll get to meet all of the local team.
Brian Smiga: All right, I'm going to count on that, Nitin. Thanks so much for the interview. This is Brian Smiga, the SpeedyVC signing off. We're focused on democratic growth with Unshackled.
Nitin Pachisia: Can I just make a plug?
Brian Smiga: Yes, please, go for it.
Nitin Pachisia: Talking of democratic growth, we are democratically open. If you go to our website, you'll see a pitch us link and everything that comes in, every pitch that comes in gets a response. That's part of the democratic culture is we expect that not every immigrant's going to have a warm intro to a Silicon Valley VC firm and we don't want to close the doors on that. My calendar's also open and you'll see that on my LinkedIn and Twitter. Any immigrant founders that are thinking of starting the company, find my calendar or the pitch us button, and that's how democratic growth works.
Brian Smiga: Thank you so much. You are an exemplar of being open and diverse and it's music to my ears. Thank you so much.
Nitin Pachisia: Thank you for the opportunity.
Member discussion: