How I partner with founders
My approach to making founders successful throughout our journey together
|Nov 9, 2020|
The “old normal” for investors is that it takes insider knowledge to figure out how to work with them. The “new normal”? 100% transparency. Here’s my attempt at that.
I spent many years studying and innovating on how to create incredible customer journeys. Now I’m doing the same with founders — creating a founder journey that’s intuitive, easy, and delightful for you and also generates great outcomes for you.
At Gainsight we came up with the formula CS = CX + CO, which means “Customer Success = Customer Experience + Customer Outcomes.” The point is that in order to truly generate success for customers, you need to create a happy experience for them and generate tangible ROI for them; both are required.
Now that I’m investing full-time, my mantra is:
FS = FX + FO
meaning “Founder Success = Founder Experience + Founder Outcomes.”
Bottom line: I want you to love working with me, and I want to contribute to your success.
Here’s my approach to creating great experiences and great outcomes for the founders I work with along the journey from first interaction to onboarding.
Step 1: How to get a quick response from me
One of my most significant concerns about our current era is the volume of distractions. I believe it has reduced our inner peace, our emotional stability, the quality of our decisions, our ability to prioritize, and the depth of our relationships. (This is true at the level of the individual and the country.)
So it can challenging for me to sort through cold emails and LinkedIn messages from founders; I almost never respond to them. At the same time, I believe strongly that you shouldn’t have to have a pre-existing network of investors in order to get funding.
To help me help you, if you feel you need to cold-email me because we have no mutual connections, please follow these instructions for sending me a video pitch.
Note: Make sure to match my industry focus. 90% of my investments are in SaaS. That means you’re a software company and have some element of a B2B strategy. 10% of my investments are in Digital Health, again with some element of a B2B / SaaS-enabled strategy. I won’t be investing outside these areas for the foreseeable future (except in extremely rare, one-off cases where I already know the founder deeply and I have deep personal experience with the pain point), so it will only make sense to contact me if your company is in one of these areas.
Step 2: How to nail the pitch
Here are the criteria that I use to decide whether to invest.
(1) Founder is in the top 1% of talent. Specifically I evaluate talent based on:
(a) How concisely and compellingly you communicate…
(i) your unique insight, informed by your authenticity to the pain point, and
(ii) your path in getting from point A (your wedge / MVP) to point B (a billion-dollar company).
(b) You are a fast-moving, intense executer who learns and adapts quickly. You have demonstrated this by generating results in adoption and revenue growth (even if they are early milestones). It helps if you include a link to your LinkedIn profile.
(2) Your business makes sense in the context of your ecosystem.
(a) You have an undeniable wedge in addressing a deep pain point. Your users are obsessed with your solution.
(b) It doesn’t require significant change in your product, go-to-market strategy, or your broader ecosystem in order to address a multi-billion dollar market.
(c) There is a strong tailwind propelling your business. In other words, there is a clear answer to the question, “Why now?”
(3) There is nothing obviously wrong: e.g. you have a technical co-founder, etc.
(4) If you are raising a Series A+, I’ll want to look at your:
ARR growth rate and pipeline, customer stickiness, unit economics, and other metrics
Lead investor in the round
Because I’m best at making decisions in the morning, I block 8-9am every morning to evaluate startups based on the criteria above and make decisions on next steps. (For more on this, read the book When by Daniel Pink.)
Step 3: How to convert a great pitch into an investment
Assuming you’ve shared a strong pitch per above, I’ll ask to do a reference call with someone who can speak to your entrepreneurial abilities (especially as a “fast-moving, intense executer who learns and adapts quickly”, per above). I view investment decisions similarly to how I used to view hiring decisions when I was a COO.
If I’m not intimately familiar with your market, then I’ll want to speak with a couple of folks who can speak to points 2(a-c) above. If you can connect me with people like that, you can speed up my decision-making process.
Step 4: Closing
If I decide I want to invest, then I’d love to introduce you to other angel investors who I think may also be interested, as well as potential lead investors if you’re looking for one. (I don’t lead rounds; I co-invest alongside lead VCs.) I’ll want to know, what matters to you in choosing investors? Are you looking for certain skill sets, networks, or other attributes?
My check sizes are typically 1% of post-money valuation at Pre-seed and Seed stages, and somewhat less than that for Series A+.
Step 5: Onboarding
Once we’ve closed the investment, I’ll suggest that we do an “onboarding” meeting. This is an opportunity to talk about what’s top of mind for you and how I can help. Common priorities include:
Funding announcement. To help you with the PR campaign surrounding that, I typically write a blog post about why I invested and collaborate with you to decide on the themes I should address.
Key hires you’re looking to make. I am happy to make introductions to people in my network and also send your job description to my Job Seekers email list (containing several hundred people, and counting).
Customers you want to land. Likewise, happy to make intros to people in my network. I know executives at many midmarket and enterprise companies and am one degree removed from most companies you want to sell to.
I’ll be publishing a lot more in the future about my ever-evolving approach to supporting founders. I’ll be covering topics such as:
What happens after Step 5 above
How I measure Founder Success
How I keep partnerships with founders strong as my portfolio grows
What I’ve learned from the founders who challenge me to be a better partner every day
Feel free to send feedback on this approach or suggestions to me anytime at email@example.com.