NEA veteran joins Canvas Venture Fund, brings both investor and entrepreneur chops to the team

Canvas Venture Fund spun out of venture capital firm Morgenthaler last summer and has been searching for a new partner to round out the team ever since. Now it’s finally found one: Paul Hsiao of New Enterprise Associates (NEA).

Hsiao is joining the fund as managing partner after spending 10 years at NEA, where he led investments in companies such as Houzz, Gaikai, Boingo, Elance-oDesk, SayMedia, and 42Floors.

With his experience both as an entrepreneur and an investor in vertical software-as-a-service and enterprise among other things, Hsiao joins the fund as an “athlete,” someone that with a multi-faceted skillset and knowledge, Canvas managing partner Rebecca Lynn told VentureBeat in an interview.

“Paul started in security, then in semiconductors, then in vertical SaaS. We expect him to continue to work in vertical SaaS, and look at enterprise opportunities and whatever else comes up in the next few years,” said Lynn.

The fund’s founding team identified Hsiao early on in its search for a new partner due to his involvement in investments in companies such as LendingClub, Doximity, and Houzz.

“Our companies are often marketplaces,” said Lynn. She added that they look for lightweight, capital-efficient software and services to invest in as part of the fund’s investment focus. Canvas also only makes early-stage investments, mostly first and second rounds with the occasional seed funding.

Canvas’s current fund closed at $175 million dollars, more on the smaller side of venture capital funds.

“If you look at [small funds like] Union Square Ventures, Emergent [Capital],… This is the perfect size. Benchmark started back in the ’90s and continues to have this craftsman-like approach” that smaller funds have, said Hsiao.

When asked to compare Canvas’s approach to that of firms such a Norwest Venture Partners, which raises bigger funds and doesn’t limit itself to any investment stage or industry, Lynn said, “Different people have different philosophies. When you look at the data, smaller focused funds have better returns. And it’s also about knowing what you’re good at. We’re good at helping companies finding product-market fit.”

Naturally, Norwest believes just the opposite — that its diversified approach has allowed its funds to constantly bring returns to investors and protect itself by spreading the risk across various kinds of investments.

The team also prides itself on its strong skills in helping portfolio companies with their marketing and market-fit strategies. It believes that’s one of its differentiators.

“Early in my career, I kept having people coming to me for marketing. Marketing is actually a very rare skillset in terms of operating,” said Lynn.

Hsiao said that while founding managing directors “Rebecca, Gary [Little], and Gary [Morgenthaler] are a powerhouse when it comes to marketing,” he will bring to the team his set of enterprise knowledge, exposure to later stage venture capital deals, and deep experience with merger and acquisition deals from his time at NEA.

Canvas’s current fund has already invested in four companies, three of which it has disclosed (HealthLoop, Totango, FutureAdvisor), and about 20 percent of the fund has been invested thus far, according to Hsiao. He added that the fund is probably looking at about a three-year cycle, so approximately two years are left.

“We’re looking at quite a few things together, and we’re quite picky,” said Lynn about the next investments.

Canvas Venture Fund spun out of Morgenthaler in August 2013, founded by Rebecca Lynn, Gary Little, and Gary Morgenthaler, and is based in Menlo Park, Calif.