AlleyWatch: Inside the Mind of a NYC VC: Kapil Desai of Catalyst Investors
Welcome back to Inside the Mind of an NYC VC, a highly acclaimed series at AlleyWatch in which we speak with leading New York City-based Venture Capitalists. In the hot seat this time is Kapil Desai, Vice President at Catalyst Investors, one of New York’s first growth equity firms, which was founded in 2000. Currently investing out of its fourth fund, which closed at $377M in 2015, Catalyst has made investments in names like ChowNow, MINDBODY, MediaMath, WeWork, and WeddingWire with a research-driven focus on tech-enabled businesses.
Kapil was kind enough to join us in our offices in Soho to provide some candid insight into his path to venture from banking, the nuances of growth equity investing, actionable insights for founders that are raising and considering growth capital, ramen in NYC, and much, much more…
Reza Chowdhury, AlleyWatch: Please tell us a little bit about background and how/why you started in growth equity.
Kapil Desai, Catalyst Investors: I’m originally from South Jersey (not to be confused with New Jersey). I went to Georgetown for undergrad where I was enrolled in the business school. Directionally, I knew I wanted to study “business,” but I had a bit of trouble identifying exactly what that meant. Not knowing what I wanted to do, I took the tried and true investment banking route and ended up at Credit Suisse in its Technology Investment Banking Group in San Francisco. While there, I primarily worked with software and internet companies across a host of advisory services, from capital raises and IPOs to M&A.
One of the IPOs I worked on was for MINDBODY, which provides business management software for companies in the health and wellness industries. Serendipitously, at the same time, a headhunter reached out about a position with Catalyst, who happened to be the largest institutional investor in MINDBODY. Having had some exposure to Catalyst and its investment philosophy, I knew this role might be a potential fit. The interview process reinforced my interest as it was clear that this new role would allow me to work with companies at a pivotal inflection point in their maturation, the “growth stage,” and allow me to help talented founders and management teams work towards great outcomes. More than five years later, I can confidently say that this was the right path for me.
Tell us more about Catalyst Investors.
Founded twenty years ago, Catalyst is a growth equity firm that invests in software and technology-enabled services. We take a research-based approach to investing and have active themes across several functional and vertical areas, including food, legal, compliance, healthcare and several others. Some of our representative investments, include Mindbody, WeddingWire, ChowNow, Weave, and Fusion Risk Management. Our team is up to 16 people, all based in New York.
How has the transition been from banking to startup investing? What skillsets from banking have been helpful in investing?
The transition from banking to startup investing has been (mostly) smooth. Banking does a great job of building your technical base with exposure to financial modeling, unit economic analyses, and market sizing. It also helps you with softer skills such as prioritization and communication as you’re working on multiple projects with multiple teams at any given time. These skills are immediately transferrable to growth investing, particularly with investment analysis and execution.
The biggest difference between banking and startup investing is the time horizon and immediacy of results. Banking is often project-based and has a specific goal within a specific time frame. Throughout these projects, there’s typically immediate feedback and direction that helps you iterate and respond accordingly. Startup investing has a much longer timeframe and feedback periods are elongated. You need to be comfortable trusting that the process (thematic sourcing, go-to-market execution, strategic guidance) will lead to results.