How a $3B VC Picks Founders Before There's a Product | Mayfield, Navin Chaddha
In a Nutshell
Mayfield invests 70% of its capital at the idea stage by running deep "Founder's X-rays" that focus on three non-negotiables: a growth mindset, a willingness to surround oneself with excellence, and a marathon—not sprint—outlook. Navin Chaddha’s own path—from VXtreme’s dot-com implosion to Revo’s disciplined crisis management—illustrates that learning from repeated failures and treating people with respect during downturns builds the long-term relationships that drive outsized outcomes like Poshmark’s ten-year journey to IPO. The firm’s guiding principle is that return on investment should be measured not just in dollars, but in how much founders and investors elevate each other over decades.
These notes were generated by AI and may contain inaccuracies.
Naveen Chaddha is Managing Partner at Mayfield, an early-stage venture capital firm managing $3 billion and investing in founders of artificial intelligence companies. 70% of investments go to the idea stage where there is nothing but paper and pen. Since there are no metrics and most of the time no market size, the firm does extensive work to evaluate founders through what they jokingly call "Founders' X-rays."
The most important learning is that you learn more from failures. In the face of rising tides, even fools seem intelligent, but when the tide turns, only the strong survive. The strong are those who keep moving forward. Founders need a growth mindset, to surround themselves with excellence because company building is a team sport, and to look to the long term because company building is a marathon, not a sprint. If founders have these characteristics, the investor commits: "Okay, I'm here to support you. I will be your guide, I will be your safety net, and I will be your GPS. Let's go." The compatibility of values doesn't change.
During the oral PhD defense, Naveen had 35 research papers and a breakthrough technique. When opportunity knocked, he believed it was an opportunity to change the world. The technology created at VXtreme enabled online video streaming to become accessible to everyone. He decided to postpone the PhD discussion and never contacted his parents about it, knowing they would think he was crazy for leaving the PhD program for a startup and then canceling the exam after 3-4 years of work. He made a conscious decision to postpone and never went back.
It was unusual for an immigrant with a student visa to take such a risk, but his conviction is: if you don't take risks, you won't get rewarded. If you have the desire to do something big, you have to take the leap and not follow conventional wisdom, because that leads to humility. His role was Technical Director at VXtreme.
Wisdom and experience have value, but he didn't own either when he was 25. The company raised $100 to $150 million in 1997 for a game-changing acquisition. The CEO they hired, in his mid-fifties with over 40 years of experience, advised them to proceed with the sale. They took the company public at the worst possible time during the dot-com era. Startups were selling to startups, and the engine of revenue was growing at any cost regardless of spending, believing the market would never slow down.
When the dot-com crash occurred, the market completely changed. If you have spent a lot on infrastructure, you cannot easily correct course. The company was taken public within two years, valued at $1 billion, rose to $3 billion, then sold for a few hundred million nine months later, and the market completely evaporated. There were "two black swans": the collapse of the dot-com bubble and the events of September 11. Things don't always go according to plan. This was his first failure, and it taught him a lot.
Revo was providing Software As a Service (SaaS) infrastructure before the term became common in 2000-2001 for the world's largest companies. As the recession began, the goal was to ensure money would either get to acquisition or break-even in cash flow. A board member referenced the movie Titanic to illustrate that the executive's responsibility is to lay off employees first so they are safe when the collapse happens, and to be the last one to leave the sinking ship.
This was done when there was plenty of time, treating people fairly, giving good compensation to support them, and helping the company reach break-even point. It was done with all due respect and appreciation. Some people who work with him maintain relationships for 20 or 25 years, including those whose roles were cancelled. Absolute honesty is essential, where you love, respect, and care deeply about people, but in moments of crisis, you have to make the right business decisions, and that's what leaders do.
Faith has always been centered around people. Most investors think about return on investment in terms of financial return, which is very short-sighted thinking. Return on investment is related to the responsibility of founders and investors towards the advancement of the individual—helping individuals reach levels in life they may never have dreamed of before.
Rehan Jalil is a good example. They met in 2006 or 2007 through an introductory meeting. He was an engineer trying to build a company, and they got along immediately. Both in their mid-to-late thirties, they agreed to work together. When he started his second company, he became a successful entrepreneur and didn't speak to anyone else for funding due to the experience they created for him. Despite other large companies, he never returned to them. The company Elastica became successful, and he was establishing his third company.
What was seen was not the idea, because ideas come and go, but what he had learned and how eager he was to create a bigger company this time. The company he created this time was six times bigger than what he had achieved before. It is that thirst, the ability to learn, and the dream of what he will do differently this time.
In order to learn, first and foremost, you must believe that you have not learned everything yet. You need to be flexible so you don't end up becoming like a dinosaur. First and foremost, you must have a growth mindset. Secondly, you must listen. Most people talk, but they don't listen. As a bold investor, you need to listen to the founders, listen to the customers, listen to the ecosystem, then go back and recognize the patterns.
When similar signals were occurring in another field, you ask: "So, how do I take that, translate the lessons from that field, do some mathematical transformations like an engineer, and apply them to this thing?" Always be in the mode of an innovative founder, listen to people, follow social media, read blogs, and keep improving. You can consume a lot and learn a lot from reading, but you need to practice. Practice quickly. Try again quickly to improve. You learn more through failure, because if you don't fail enough, you're not trying hard enough. Then you are aiming at the ceiling, not the moon. One should aim for the moon.
The value of people was always understood, but what wasn't realized was how much time it takes to build a successful company. There's no such thing as overnight success. Whatever you do, it will take a long time, so make it a marathon, not a sprint. Especially if the goal is to keep improving, you don't even know where the ceiling is. If you're aiming for the moon, you need to keep jumping higher, higher, and higher.
Met Manish in 2002, 2003. He founded a company in 2004 that was ahead of its time in social media or mobile phones. It would have been "Pinterest" on the phone if the phone had existed back then. The idea wasn't understood at the time, so no investment was made. It was a small acquisition, but they stayed in touch over the years. When the iPhone came out, they used to meet for breakfast at a cafe called Big Dog in Cupertino.
Manish created Caboodle, which helps people figure out what to shop for in a social way. But now social media is everywhere and the iPhone has arrived. He showed Instagram and had an idea to create a women's fashion company, primarily based on mobile phones and social networks, that would not only help you discover what you want to buy, but will also complete the buying process. The big idea was that they would not be a retail store, but a marketplace that would allow people to sell from their wardrobes and become entrepreneurs.
That was the original chip. Ten years after funding, the company went public and now has millions of buyers and millions of sellers. They were the first investor who helped establish the company. They did not sell their shares even in the IPO, and were the last investor to sell when the acquisition took place. It's more like a marathon, not a sprint. There are many lessons to be learned. The satisfaction of starting something even 6 months before the entrepreneur decides to work on the company is amazing because you are involved in creating that thing with them, then helping them achieve their dreams, and being by their side all the time.
There has always been pressure from parents. Naveen means "new" in Hindi. They always had expectations for achieving great things that perhaps they themselves could not do. They gave Maslow's hierarchy of needs for comfort, gave confidence, and told him to "Go out and change the world." This led to entrepreneurship. When in college, personal computers had just come out, and there was a company called Sun Microsystems founded by Vinod Khosla, who was also a graduate of the Indian Institute of Technology.
This really inspired pursuing entrepreneurship by leaving the country, coming to America, and going to Stanford University to learn how that environment would help create companies. When coming to a new country, you don't know the culture, don't know the people, and don't know what awaits you. What surprised most was that someone else had created a fellowship with money he had earned, intended for immigrants and foreigners. Secondly, welcomed by students and people in Palo Alto who picked up from the airport, took to their homes, and gave the comforting feeling of being part of a family.
In orientation, realized this is a land of endless opportunities. You will reach beyond the limits of your dreams and ambitions. The environment was extremely supportive, and this led to everything that defines who he is today in giving back to the community. Mayfield firmly believes in giving back. They allocate 1% of their fees and revenues to support local efforts. They work in the field of empowering people to start their own businesses.
The best way to create an "AI garage" that targets students and people who don't know what it takes to become entrepreneurs. They give them financial allocations and cloud credits, and see if they can achieve something. It's a long-term vision. If you do good to people, great things will happen to you. Not everything has to be a financial transaction. Belief in investing in relationships, not transactions. Long-range vision. You can't lose in the long run.
Some realized they did not want to be entrepreneurs. Ultimately, not much will be achieved within one year of establishing these garages. You must adopt a vision that extends for ten or twenty years. This is what was done with the Mayfield Fellows program at Stanford University. They have invested in 12 young students for over 30 years, and they have gone on to build great things, whether for-profit, non-profit, or aimed at helping others. You need to adopt a very long-term vision and not be driven solely by financial incentives.
Gone through many technological revolutions and reinventions from the personal computer to the internet, then mobile, then cloud. They were ten times more opportunities, mainly because some were innovations in interfaces and user experience, others were innovations in infrastructure such as cloud computing. The mobile phone was an innovation in the front end.
For artificial intelligence, it is a 10-fold, or even 100-fold, opportunity, firstly because the interface is changing for the first time. Machines have come to understand our language instead of us understanding the language of the machine. There are 30 million developers who can program, but as seen with ChatGPT, there are 900 million people who use it monthly. Secondly, thanks to computing and artificial intelligence technologies such as graphics processing units, accelerators, fast memory and fast networks, machines have become capable of doing what humans do, which is perception.
Take this as a companion. It's a colleague, it's artificial intelligence. You can talk to it the way you talk to another person. Another person becomes available in the form of a colleague and you converse in natural language. It is a productivity-multiplying force that increases productivity 10 by 10, or 100 times, and will redefine how we work, live, and conduct our lives. Very optimistic with no fear of missing out.
In the field of financial services, you are only evaluated based on the returns you generate. Your alternative investment portfolio will most of the time look better than your current one, but who cares? As long as you take small amounts of money, grow it, and continue to do so, you will stay in this business. This is the most important thing to avoid the fear of missing out on opportunities. You must have your own convictions and your own strategy. If you chase others, they will be ahead of you, like a venture capital firm or a startup chasing another firm. The person in front of you sees the abyss and changes direction, but you don't have enough time, so you fall out of the abyss.
One must have one's own "polar star," one's own strategy and convictions. As long as you believe in it, miracles will happen. You can't keep changing. The fear of missing out is for imitators. If you want to be a leader, and help other leaders, you must have faith and conviction in what you do. You can change, but don't imitate others. You don't become great by imitating others.
In another life, if not succeeding as an entrepreneur or venture capitalist, would have been a university professor, because first you learn on your own, secondly because you are helping others. As a bold investor, feels like doing that—helping entrepreneurs, giving advice, writing a lot, and participating in discussions. It's about giving back to the community. Besides writing books, just as professors work with their teams to write research papers, publishes content on LinkedIn two or three times a week, collaborating with the team, entrepreneurs, and investors, because ultimately it's collective intelligence. Applying parts of that in a different way, in a new format, different from universities.
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