REV VC on what makes a founder backable

We sit down with Daven Nijran-Talwar, Principal at REV a data and analytics-focused fund that's invested in breakout companies, such as Babbel and Palantir, since 2000.

In an industry where networking is paramount, it’s hardly surprising that most VC investors are extremely friendly. So, when we say Daven is one of the friendliest investors we’ve met, it sets the bar pretty high!

Daven has been a Principal at REV Venture Partners for the last six years and is one of just three investors at the fund. REV is pronounced as an acronym, although he admits they answer to anything, which is usually “Rev”!

Daven uses his smile generously. He’s concise and thoughtful, with a contagious playfulness. Over a Zoom, we covered a range of topics, from his interest in combatting Generative AI-related fraud to the uncomfortable reality founders face when they expand to the US.

About REV:

REV is a global early-stage VC fund backed by one of the largest content, technology and analytics companies RELX.

Their mission is to help build companies that can transform their markets through the application of data, technology and analytics. Since 2000, they’ve invested over $250m in technology companies, their portfolio includes standouts such as Babbel, Healthline, Palantir, Recorded Future and SingleStore. 

REV ticket sizes range from $1-10m. They are global investors, active in all major western VC hubs - San Francisco, New York, Boston, Los Angeles, Seattle, London, Berlin and Tel Aviv. Their largest portfolio cluster is in California.

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The interview

Tell us about REV?

We're a bit unique as a venture fund. Firstly, there are just three of us on the team, and secondly, we're a single LP fund. That LP is RELX, a large FTSE-listed corporation that owns LexisNexis Legal & Professional, LexisNexis Risk Solutions, Elsevier (Scientific, Technical & Medical Information) and RX (Exhibitions). Although we’re a corporate VC, we're not your typical strategic corporate VC. We're not investing off the balance sheet, nor are we the early-stage M&A arm or anything like that for RELX. We're an independent, financially motivated VC fund loosely coupled with but highly connected to RELX.

What that means in practice is there's no championing or blackballing from any of the different RELX divisions. We're free to invest how we like, where we like, and when we like. That being said, we do like to invest in areas quite complementary to RELX’s different business divisions. 

We describe ourselves as a data and analytics focussed fund and 20 years ago that meant we were very much a deep-tech kind of fund. Mainly because not many people were looking at data and analytics the way we were. Now, this space has expanded significantly, so we tend to find ourselves playing in multiple areas. About 60% of the companies and deals we look at will be within that horizontal data and analytics space, and the remaining 40% will typically be in industry vertical B2B SaaS solutions. We're pretty agnostic in terms of industry verticals and will be involved in sectors like EdTech, LegalTech, FinTech and AgTech. We’re just really looking for the data analytics element to them. 

We're looking at companies that are roughly at around $1 million ARR and past that proof of concept stage, past that piloting stage. Companies that are starting to get some good, sticky traction, some good revenue and are at the point where we can go in and help them scale up to that next stage. Geography-wise, our team is all based here in the UK, but the vast majority of our portfolio has been in the US, which has just been where the best opportunities for us happen to have been. About 90% of the deals we look at are in North America, but we also look to deploy across Europe and the UK.

What’s your ideal ticket size?

The first cheque for us is typically anywhere from $1 million to $10 million. We do have the capacity to follow on as well, and we typically do, but really it is opportunity-dependent for us. We'll lead the deal about 40% of the time and in those cases we typically look for a board seat.

What are your current focus areas? What’s exciting you at the moment?

A lot is happening in this AI wave. We've spent a lot of the last two years digesting how this space is taking shape and how we want to play in the space. This is something we’re very familiar with - AI is something we've been connected to since the early days of Palantir. We're at the stage now where you have these large model providers who have grown very large, very quickly and all with significant funding, but not necessarily significant VC funding. So, we're looking to see how VC's can play in this world, which is currently dominated by the big tech cloud providers.

At the moment, I’m particularly interested in how Gen AI is being weaponised in fraud and the new solutions that are defending against this. New technology always results in new risks and the solutions that are being built to combat and mitigate against those risks are quite an interesting space to play in.

At the same time, we're looking within deep industry verticals. For example, companies which have that deep domain expertise needed to layer on top of existing LLMs.

Is there anything that’s holding you back from investing in this space?

We’ve entered a time where product building has become more democratised than ever. Nowadays, a good product doesn't necessarily mean a good business. A good business needs to have some core fundamentals in place. They need to be able to generate good sticky contracts for long-term bookings and they need to be able to consistently scale to grow revenues.

We’re looking for companies that are more than just flashy point solutions. We’re looking for the ones that have the capacity to grow into multimillion-dollar businesses. That's what's quite hard to find at the moment, the needles in the haystack - because the haystack has grown so much more over the last few years.

How do you balance the risk and reward when evaluating potential investments? 

We're not PE guys. We won't forecast cash flows because they are so inconsistent and just impossible to accurately forecast. Given that we are early-stage investors, a lot of what we're looking for is the team. Does this team have the capacity to really build and execute on their plans? Is the market size big enough? What is their Go-To-Market strategy? Is this something which we can generate a solid exit from? This is something which in the market seems to have lapsed a little bit over the last five years or so, but we work to maintain our discipline around this.

What do you look for in a founder?

I look for a founder who isn't just there to be a founder. Anyone can be a founder nowadays, but it’s much harder to be a backable founder. It’s about being a founder with a real mission and that mission isn't just to raise $100 million rounds so they can say that they have a unicorn company on paper. That mission is to genuinely try and grow something. 

“I think over the past five years entrepreneurship went from being a get-rich slow endeavour to a get-rich-quick scheme. We’re not looking to back people who aren’t just trying to get paper-rich quick or chasing lofty valuations. The end goal of a founder should never be to carry on raising money, it should always be to grow.”

What happens when the goalposts change for a company you’ve invested in? 

With the companies we lead deals for we'll typically take a board seat. For others, we might have an observer seat or we’ll just stay closely connected to the company. We want to stay on hand to help the companies navigate difficult decisions. We're not trying to get directly involved with the day-to-day business operations because ultimately we've invested in the team and the founders because we think they are best placed to do that. We try to instead give high-level strategic guidance to help them navigate.

We see a lot more of the market than founders do. Founders will naturally have a myopic lens based on what they're focused on, and that’s what they should have. Whereas, we see across multiple different industries and multiple different market stages. We can take learnings from elsewhere and we're able to share that information and learnings and help them navigate through whatever waters they may come into. 

Why would a founder choose REV over another VC?

We've been around a long time. It's quite rare in this industry to have a partnership between the two founding partners that’s lasted for 25 years. In that time as a fund, we've seen the .com rise and crash, 2007 rise and crash and the tumultuous times we saw during COVID-19 with the massive upswing in funding, and now the downturn after that. The knowledge we can offer because of this is valuable.

We’re also unique in that for a long time we've been bridging that gap between the US and Europe.

The US has always been far more advanced on the entrepreneurship and tech side than Europe. We're able to help our companies expand across that geographical channel. I think a lot of founders underestimate the challenges they'll face by expanding from Europe to the US in particular. 

One of the best analogies I've heard is if you’re trying to sell into the US, and you expect it to be just as easy there because you've managed to sell $1 million of ARR in Europe. But, instead, it’s like being punched in the face as soon as you get of the plane at JFK. It's a very different way of doing things. It is a very different environment when it comes to selling. We're able to help those founders be best placed to take on this challenge.

The unique relationship we have with our LP is also a great asset that we’re able to share with our portfolio companies. RELX has an incredible reach as a market leader in business information and analytics in a number of different industries. As a fund we’re able to leverage RELX’s exposure and expertise and this is something which flows down to our portfolio as well. 

Is there any advice that you regularly give founders?

“The advice I'm finding myself giving to founders is to really consider how much they need to fundraise and how they should go about that fundraising. I always say don't just chase those lofty paper valuations, chase an exit instead.”

I don't want to sound like a mean VC, but I always do ask founders to consider how much they’re raising. Do you need to raise this much and do you need to raise at these valuations? I do understand that no founder wants to be overly diluted and it’s easy to think that if you think you can raise at a $100 million pre-money valuation at Series A, why would you raise at a $60 million valuation and get that dilution? But in many instances, what we've seen is that all you're doing is kicking the problem further on down the road because ultimately, your goal as a founder and our goal as an investor is to generate an exit here, not just a frothy paper valuation. 

If you're building a company which realistically isn't going to be a multi-billion dollar public unicorn (and not every company should be) then you're looking to get a good exit in your industry. You're really hammering the chances of being able to do so by raising such a lofty valuation so early on.

This is what we’re seeing now in the mid to later-stage market. In 2021, so many companies around Series A/B were raising at ginormous valuations, and now they're stuck in the water. Because, how do you follow on from inflated valuations in a contracted market? 

That said, there is a lot for founders, and us as VCs, to get excited about at the moment and I’m also giving out more and more positive advice. We’re currently at a point where the world has never been more receptive towards new tech and innovation as seen by the rush in the last decade for all companies to become tech companies, and now even more recently for all companies to become AI-enabled companies. This is a once-in-a-generation moment where we are at a nexus point of reigniting incumbent industries with new tech. Just as excitingly, there has never been a stronger talent pool out in the market to help enable this. With all that in mind, the best piece of advice I can give for any founder at the moment is to go out there, embrace this exciting climate, and build! 

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