Nikhil Basu Trivedi on Small Funds, Early Traction and Venture Judgment

Nikhil Basu Trivedi says a Shasta Ventures partner advised him early in his career not to be constrained by the title on his business card. He thinks junior investors should learn the whole venture process: finding, deciding, winning, helping and eventually exiting investments. His other principle is that exceptional companies can merit exceptions to a fund’s usual rules.

Stebbings asks whether founders should bypass associates and go directly to partners. Basu Trivedi says the answer depends on the person and conversation: junior investors can be thoughtful and can help an investment happen. He acknowledges his own bias as someone who began at Insight Partners as an intern and analyst.

Canva was an exception for Shasta on several dimensions, he says: it was in Sydney, raising on a convertible note with a $25 million valuation cap, and had no revenue. He recalls several hundred thousand monthly active users and 30–40% monthly growth. These are his retrospective figures and his firm had an investment interest.

He says the team saw users creating hundreds of thousands of designs, returning over early cohorts and using Canva for a range of purposes. Growth was organic before the company had developed its SEO strategy. For him, those early signs of product-market fit mattered more than objections based on geography or founder profile.

Footwork was investing its first $175 million fund at the time. Basu Trivedi believes small funds can outperform large ones on return multiples and says a 5x net return on a billion-dollar-plus fund is exceptionally difficult. Stebbings’ example of a 6x gross return is not net of fees and carried interest; the speakers’ fund-size thesis is a judgment, not a demonstrated universal result.

They discuss the incentive gap between maximising a fund multiple and maximising the dollars earned by a manager. Basu Trivedi says large fund sizes and assets under management can become status measures, making downsizing difficult. He acknowledges that his own early-stage specialist firm has a bias toward smaller funds.

Stebbings notes that larger firms can offer founders more capital at a higher valuation. Basu Trivedi says constraints can help early teams find product-market fit, but does not say a smaller round is always better: the right partner, company and capital needs matter, and some businesses need more money early. His firm’s own business model gives him an interest in this debate.

Footwork generally looks for a product already in the market with early signs of demand, rather than a highly priced team in the hottest category. Basu Trivedi criticises very large seed rounds for foundation-model startups, suggesting some capital immediately goes to expensive hardware. He presents that as his investment view, not proof that such rounds will fail.

Stebbings argues that some highly publicised AI funding terms are reported incompletely and claims parts of certain rounds used uncapped notes. Neither speaker provides documents for those examples. They then discuss companies with many years of cash but no product-market fit: Basu Trivedi says runway must support real experimentation and eventual progress.

Returning capital or changing direction requires honest conversations with founders, he says. Stebbings argues that a team already backed might be worth allowing time to iterate, citing Slack’s origins. Basu Trivedi agrees if the team is moving urgently, testing ideas and speaking transparently; simply repeating the same unsuccessful work is different.

In ranking investment factors, Basu Trivedi puts early traction first, people second and market third. Traction need not be revenue: frequency, retention, word of mouth and users saying they cannot live without a product can all be early signals. He says he accepts more market risk because market size can be especially difficult to predict.

At the time, Footwork had made 11 investments: six seed and five Series A, with an average initial check of about $4.5 million and a $2–9 million range. These are the firm’s figures for that moment, not a current portfolio count. Basu Trivedi says the team repeatedly asks how large a company could become even though it weights market behind traction and people.

Stebbings observes that investors in major companies often underestimated their eventual markets. Basu Trivedi agrees that exceptional products can expand or create markets, which is part of why he weights market size lower. Stebbings still wants a directional sense of whether a company is moving with or against a broader trend.

One founder-assessment mistake has been confusing fundraising skill with the ability to build a business. Basu Trivedi says compelling storytellers can attract talent and term sheets without necessarily building product-market fit. Stebbings counters that selling to investors, customers and employees is important too; Basu Trivedi agrees it is not inherently a sign of failure.

To test clarity and candour, he sometimes asks a founder to imagine their first board meeting after an investment and identify the most important issue to discuss. He looks for an answer that recognises both what is working and what is not. Both speakers value confidence paired with vulnerability about unresolved problems.

Basu Trivedi admits to insecurity about having started a firm that has yet to prove itself through distributions. He wants Footwork to reflect the values of himself and co-founder Mike Smith. When a first founder meeting stays on his mind and prompts further research, he treats that as a signal to investigate, though he recognises it is not a perfect test.

Footwork’s two partners use a four-point scale: one must strongly support an investment and the other cannot strongly oppose it. Stebbings questions whether middle scores encourage ambiguity. Basu Trivedi says a strong objection can flag real downside, while a partner can dislike a deal yet still commit to it; trust and shared values make that possible.

He recalls being less supportive of some investments because they lacked early product evidence or required a higher price, even though others were right to back them. That is why he tries to remain open to colleagues’ conviction. At Footwork, he says, the partners do not assign deal credit internally.

For the first year after investing, both partners attend board meetings and work with founders together. Basu Trivedi acknowledges that the practice is unusual and does not scale indefinitely, but says it builds a genuinely shared partnership and brings complementary skills. This is also a description of Footwork’s service to founders.

Partnership decisions can become dysfunctional when the ability to sell a deal internally or accumulate political capital outweighs the substance. Basu Trivedi also rejects a blanket instruction to wait a year before doing a first deal: if an investor has found an exceptional company and truly understands it, he believes they should pursue it.

Footwork selected limited partners around three criteria: the quality of the personal relationship, whether they had seen and could push for world-class performance, and whether the institutions’ missions appealed to the partners. He says the firm received around $450 million of commitments for a planned $150 million fund and ultimately raised $175 million.

The partners wanted diversity by investor type and check size, with no single LP above 20% of the fund. He says Footwork had about 15 institutional LPs, including six university endowments, foundations, funds of funds and family offices. A concentrated endowment base could face correlated allocation pressures, in his view.

They discuss how few LPs are willing to commit early to a first-time fund. Basu Trivedi says some of Footwork’s largest supporters had not known the partners for very long, while a well-known institution that committed a smaller amount also helped establish credibility. Those are examples from their fundraising process, not a universal formula.

Footwork’s fundraising materials listed people who had served alongside the partners on boards and people who had offered to invest, giving prospective LPs references. Basu Trivedi suspects that helped but says he did not ask whether those slides influenced the LPs. He advises assessing the human commitment and decision-making of managers as well as their written strategy.

He considers sourcing his current weakness: two generalist partners have limited time to see opportunities while running a firm. Footwork audits calendars and aims to spend more than half of its time meeting new companies and sourcing. He considers direct support to founders a strength, though that is his own assessment of the firm.

On venture platform services, he believes a few firms have helped companies meaningfully, but says many offerings serve the fund’s own scaling as much as founders. Great companies need to develop hiring and other operating capabilities themselves. Stebbings questions whether a general talent team has the domain expertise for every specialised role.

Basu Trivedi predicts The Farmer’s Dog may be his biggest investment success on dollar gains and IRR, potentially ahead of Canva. He credits a simple business built on a distinctive insight and strong demand in pet care. He does not provide realised proceeds or a calculation; it is his forecast about a company in which he has invested.

His notable miss is Figma. He recalls meeting Dylan Field early and admiring his thoughtfulness, but his preference for evidence of product-market fit made him hesitant before a product launch. He credits early investors who were willing to back the company and wait; the example illustrates the cost of his own preferred filter.

Parenthood has made him more aware of limits to control and the value of time. He describes protecting evening time with his daughter and working later to compensate, while acknowledging that he feels less productive overall. The change has also made him more selective about investments that will require years of his attention.

Asked about AI, Basu Trivedi says he is uncertain whether many AI-first investments fit Footwork during the 2023 hype cycle, citing high prices, competition and possible overlap with foundation-model providers. He still expects worthwhile opportunities over a longer period. The title’s 99% failure figure is not established by the interview; his remarks are a cautious investment judgment, not a measured forecast of that percentage.

He says he has heard of AI applications with rapid annual recurring revenue growth followed by declines as novelty fades and users churn. Neither the companies nor the figures are identified, so the claim is anecdotal. Stebbings adds that a small enterprise trial should not be confused with a company-wide rollout.

Basu Trivedi dislikes assets under management as a venture success metric and prefers dollars returned. Stebbings similarly questions aggregating portfolio-company enterprise value when a fund may own only a small stake. Both distinguish fund scale and paper valuations from realised distributions.

His investing mistake in the 2020–22 period was following pro rata into rounds marked up six or seven times shortly after the prior round, with little additional risk removed. Footwork still plans reserves for selective follow-on support: he describes approximately 20 investments, initial checks of $4–5 million and $80–100 million for initial investments in the $175 million fund, with the remainder for follow-ons and potential recycling.

He praises Union Square Ventures and IA Ventures for discipline and, in his view, strong results, while giving no fund-level return data. He also highlights Accel investor Vas Natarajan as a thoughtful board member and notes their shared work on Frame.io. These are personal assessments, not independently verified performance comparisons.

Looking five to ten years ahead, Basu Trivedi hopes Footwork may add one or two equal partners and work with a small number of exceptional founders. He says company fundamentals may show progress before distributions and DPI are visible. That is an aspiration for the firm, not an established return.