By: Nate Bek
Sunil Nagaraj loves to nerd out about the future.
The founder and managing partner of early-stage venture firm Ubiquity Ventures says his passion lies at the intersection of cutting-edge tech and real-world impact. It’s part of the pitch of the firm’s $75 million Fund III, which focuses on “Software beyond the screen.”
At the core, Sunil believes the most transformative companies will be those that harness software to navigate, perceive, and control the physical world.
“I think to make money you want to invest in an area that people don't quite understand really well,” he says. “That doesn’t get a ton of attention... If you can find little pockets of interesting innovation, they can become huge economic opportunities.”
In 2011, he joined Bessemer Venture Partners, where he spent six years honing his investing chops. One of his notable investments from that time was Seattle-based Auth0, an identity management platform that eventually exited to Okta for $6.5 billion.
Doubling down on his “software beyond the screen” thesis, Sunil launched Ubiquity in 2017. The firm has since raised three funds totaling more than $150 million in AUM. It’s actively deploying checks at the pre-seed and seed stages with an aggressive “nerdy and early” approach. (More below on the firm’s funding strategy and details.)
Ubiquity takes a hands-on strategy, helping instill foundational principles around discipline. It’s this strategy that led to the firm’s 90% graduation rate from the seed stage to a successful Series A raise.
Sunil was kind enough to sit down with Ascend for our VC profile series, where we showcase early-stage investors from across the US. We talked in more depth about his VC passion, Ubiquity’s unique thesis, and his thoughts on the current fundraising environment. Read to the end for carve-outs.
*We've edited this conversation for brevity. Enjoy! — Nate 👾
Nate: Thanks so much for chatting with us, Sunil. What made you fall in love with VC?
Sunil: I think there’s two parts to the job.
First is about following new trends, nerding out on technologies, and getting inspired by new ideas. Many people think venture capital is about throwing darts on a board trying to predict the future. All of those things really resonate with the nerd engineer and the 5-year-old in me that used to love reading about new technologies and still what I do today. That’s half of why I love being a venture capitalist.
For the other half, I would say I didn’t have a deeper appreciation for how important it was to the job until after I became a VC. After I joined Bessemer — where I was for six years before launching Ubiquity — I got pulled in to join board meetings as an observer along with my boss at the time.
Through this experience, I started to see the innards of how companies are run, being in those pivotal meetings and discussions that change the direction of a company. These hard conversations about pivots, understanding metrics, and trying to separate the storytelling around startups from internal operations. That was the meat of building an exciting startup, which is quite different from just nerding out on cool new technologies.
It’s almost like a chess game of putting the pieces in the right place to nail the growth, management and board role of a company. That’s something I have come to love.
Can you go deeper on Ubiquity’s “software beyond the screen” thesis?
When you move a physical problem into the domain of software, you can iterate it more quickly. You can experiment more quickly, try more things, and spend a lot less money and get to a working physical solution.
In this domain, you’re still interacting with the physical world. Your input is physical, your output is physical, but inside it is software…
For example, Rocket Lab’s orbital class space rocket had an electric motor-powered turbo pump in its unique rocket engine. And as a result, the engine had a software brain and it ran lines of C++. When I visited them, they would run a test of the engine. If it didn’t work as planned, they would go back to a computer and change lines of software code within a few minutes, push it to the rocket, and then try it again. That idea was unheard of at the time. In the old world of rockets, you would have to take apart the physical rocket engine, change out a metal gear, go to the machine shop, make a new metal gear, and come back to reassemble it – for every iteration! So a software layer on hardware turns an iteration loop of months into seconds.
On the AI front, new advancements are being applied on the edge. There’s improving computer vision models and, of course, large language models. How is that contributing to software beyond the screen?
I've been investing since 2017 out of Ubiquity, and the two focus areas of the fund are smart hardware and AI. In the 2017 to 2018 window, AI was primarily focused on recognizing patterns through language or imagery, like computer vision.
In Seattle, there’s a company called ThruWave that sends millimeter wave signals through any box to determine what’s inside, effectively seeing through walls and boxes with human-safe millimeter waves. Imagine a waveguide, a sensor about as big as my hand. Once they get the signal returns, they use computer vision to apply it, recognizing patterns, detecting contraband or broken items, or missing bottles. This recognition-focused AI was the name of the game until the more recent developers where AI can start to create/generate.
An example of this new phase of AI is Ubiquity-backed Resemble AI, a startup that generates synthetic speech and detects audio deepfakes. It’s a compelling shift to use the modalities of language and vision to not just recognize but now to create imagery, videos, and language. We’re still seeing how far we can take these generative technologies with ChatGPT being a good example. It can be used to extend the user interface of any application. Instead of opening my phone and clicking buttons, I can now talk to it. I can type in natural sentences, and it can respond in kind. We’re all still sorting through how significant that is — a new interface to access technology more naturally. This might seem a minor difference, but for many industries, it was a huge deal, like Uber.
Another aspect to this next phase of AI is understanding more complicated things. AI now can navigate, perceive, understand, and actuate in the real physical world, often taking in more complexity and nuance than typical software. I think of the typical software I wrote as a kid — simple If-This-Then-That logic. Now, with machine learning, it’s like an extremely complicated, billion times more nuanced decision tree. So, AI offers opportunities to understand the details buried in medical records, legal data, or call logs and create more nuanced interactions.
This AI trend fits well with the vision of software expanding into more areas in the real world
ThruWave reminds me of Schrödinger’s cat… I do want to shift gears to Seattle. I think it’s pretty obvious what you’re going to say is your biggest win is here in terms of startup. But I am curious to hear your thoughts on the ecosystem and what makes it interesting for a Valley VC.
First, I should say that to make money, you need to be non-consensus and correct. It involves finding a niche in an otherwise saturated market, something not everyone is pursuing. Particularly, the Bay Area, while bustling and full of talent, has its own set of challenges and typical behaviors. I’ve been looking to other regions like Seattle, which presents a different dynamic. While Seattle lacks the sheer volume of startup activity of the Bay Area, it does possess an amazing level of technical and business talent, thanks to companies like Amazon, Google, and Microsoft. Further, Seattle doesn’t have the overwhelming intensity and many of the less desirable traits seen in the Bay Area.
In Seattle, I find that founders tend to be more grounded, pragmatic, and focused on building solid products and satisfying customers—qualities I highly value. For example, a few years ago, I was involved with Simply Measured with Aviel Ginzburg, who is still a close friend and now a VC. In the Ubiquity portfolio, there’s also Esper, Olis Robotics and others. These Seattle-based founders are practical, humble, and not focused on showmanship, which really appeals to me.
To add to that, these founders often come from great backgrounds, bringing a wealth of expertise but without the noise or, let’s say, the entitlement found elsewhere. They possess all the talent, perhaps even more hunger, but with significantly less noise.
I wrote a story at GeekWire around that thesis with “Substance over style” in the headline. Are there any bear cases or concerns about Seattle that someone in the Seattle ecosystem should think about?
Conventional wisdom in Bay Area venture capital suggests that there’s no better place than San Francisco to find top-tier technical founders and the critical mass necessary to scale a company. It’s taken as a fact that if you're serious about your tech startup, you’ll eventually need to relocate to the Bay Area to access a sufficient pool of engineers, managers, and leaders. I’m not entirely convinced of this necessity, however.
Take my situation; I'm from Raleigh, North Carolina, close to where I attended UNC Chapel Hill. The prevailing belief might be that starting a company there could initially involve a small foundational team, but scaling to hundreds or thousands of employees would pose a significant challenge due to a limited local talent pool. But I don’t share these concerns when it comes to Seattle. This might have been a legitimate worry in the past, but it no longer holds true today. Companies like Auth0, Esper, Remitly, and others have demonstrated that they can start, grow, and thrive in Seattle. This is thanks to the continuous growth of hometown giants like Amazon and Microsoft, whose employees might outgrow the cultures at those companies.
Addressing the point about geographic limitations impacting the potential for significant company growth or exits, this too seems outdated. The pandemic has further diminished such concerns, proving that acquisitions and operations can successfully extend beyond traditional hubs through remote work or establishing secondary offices.
While there might be an initial reaction to question the viability of non-Bay Area geographies for tech startups, the reality in places like Seattle challenges these assumptions. There aren't substantive, empirically-supported objections to investing there anymore. It’s more about making the effort to establish connections and networks. People in the Bay Area need to recognize the importance of engaging with other regions and invest the necessary time to foster relationships. In my view, the lack of investment in Seattle is no longer justified and is rapidly being fixed.
You told me that Ubiquity has a 90% graduation rate, why is that? And why should founders want you on their cap table?
If you’re serious about building a company, you'll want a serious investor from day one. Not everyone desires that, but for us, it means regular board meetings and priced rounds—it's not just lip service. You’ll present progress, gather feedback monthly and take it seriously. Some believe this approach is unnecessary at the pre-seed stage, but it's crucial for achieving a 90% graduation rate. If you want a strong, committed VC from the start, I'm the right person. This typically involves a $1-2 million investment at or soon after incorporation, a board seat, and a priced round. We're building companies to be large.
Our fund recently announced $75 million, emphasizing discipline, especially in deep tech. Our approach differs from models like Y Combinator, where $100k investments come with a casual “call if you need us.” We're hands-on, and a full third of Ubiquity’s investments are made the day of a startup’s incorporation, including Seattle-based Esper. Investing early and setting a solid foundation, I think, is what helps the success rate of Ubiquity companies.
You also have a great community resource called Ubiquity University… Let's pivot to more fun questions. What song is getting the most play on your Spotify/Apple Music?
I'm tied into Instagram reels and dance videos, so songs that come up there end up making their way onto my Spotify list. I love 90s Hip Hop. That’s when I was in middle school and high school and that’s when I locked in on music.
I was delighted to see Usher performing at the Super Bowl — that’s the stuff I grew up on and, somehow, it’s back front and center.
I love that. My dad has a Tribe Called Quest CD, and I bought him Nas’ Illmatic album. What’s your favorite shoe?
I have these Cole Haan Zerøgrand shoes that are athletic but dressy. They seem to be all the rage. I thought I discovered them, but like five of my dad friends also have them. You can wear them to a business meeting or with shorts. They’ve got cloth wingtips and rubber soles, but they look like dress shoes. They’re kind of secret dress shoes.
What’s your go-to ingredient in the kitchen?
Jalapeños.