As told to Anita Hossain Choudhry
Wow! That's a good one. I would say one thing that I don't usually talk about in my intro is that I'm originally from Michigan. I grew up there and still consider myself a midwesterner at heart, and try to bring a lot of my Michigan sensibilities to the West Coast. I've been here for going on 26 years at this point. It still has a big influence on how I think about the world and how I think about people.
There's a certain humility about your work that I was taught growing up in the Midwest. There's a certain optimism and benefit of the doubt that you give — a warmth — to people that you don't know, that presumption that they're good, well intentioned people.
Value of hard work. Community. These are all things that I associate with my time as a Michigander.
This is a very timely conversation, because my last full-time day at Uncork was April 1st. So, it's almost 10 years to the day that I went out on my own.
Starting a venture fund is like starting a company, but way slower. I'd been at Uncork for about five years by the time I decided to move on, and I’d had this idea. There were all of these founders I was meeting who didn't have much product traction, but also didn't have what I would describe as particularly strong relationships with VCs.
I noticed that you had to have one or the other. You had to know people socially and professionally, or you had to have a product that they could touch and feel, and if you didn't have both of those things, or either of those things, it was really hard to raise money.
I'd been a VC at a fund that had raised a couple of funds. I knew some limited partners, and so I thought that I would be able to just go out on my own, talk to some people, raise some money. I'd seen a lot of other people do it, and that was not really how it went.
Let me just tell you this, backing up—the construct of the fund when I started was: it was going to be just me as a single GP and we were going to invest in about 10 companies per fund in this new thing called pre-seed.
At the time in 2014, a lot of limited partners, or people who invest in venture funds, were like: “I don't know what a pre-seed company is and I just finished figuring out what seed is and now you want me to learn something new? Aren't you only going to find the companies that aren't good enough to raise seed capital, adverse selection?”
Just a host of things: “It's too many companies for one person…It's too much work… You won't own enough."
Every mean or non-constructive thing that could be said about one's fund, I heard in the beginning. So it took almost two years and 300+ LP meetings to raise $15 million dollars for our first fund. It was really hard.
I had one person who's a very good friend—and it was well meaning—I pitched him on my fund. At the end of the hour, he said: “Do you think it's too late to go and get your old job back?”
He meant it in that grandfatherly, “I'm worried about you” way. That's not how it landed with me, but he was saying it from a place of genuine concern and care.
There was just a ton of resistance and a lot of it was because people couldn't conceive of: in a world where there are thousands of venture capital funds that exist, how could there be pockets of founders who are not well served?
As I reminded a lot of these limited partners, I said: most venture capitalists are pretty good about giving money to people that they know and venture capitalists don't know everybody. Particularly, there are certain communities where venture capitalists really don't know people: people outside the coasts, women, people of color—there's a lot of communities that are really on the outside looking in.
That was just not consistent with what most people thought one should do if you wanted to build a successful venture capital firm.
I said: Well, I have two choices. I can either give up and accept that what people are telling me is true, or I can get much better at telling our story and find a way to package and promote what we're doing in a way that's consistent with what other people think can be successful.
It really was figuring out: well, how do I tell our story in a way that's authentic and honest, but also is consistent with what other people think can be successful?
Thankfully we figured it out. I'm still here. We managed to raise four funds.
I will say this: like being a solo founder, being a solo fund manager is really difficult. Because you have to raise all the money for the fund. You have to run all of the fund, all the stuff: payroll, hiring people, and you have to do the fun part of the job, which is investing in startups and supporting founders. So we've come a long way.
When I started, for the first year and a half, it was just me. I didn't have anybody working at Precursor. Then I added an associate who's since gone on to start her own fund. Today we have 12 people, and the 12-person version of Precursor is much different than the 2-person, or even 3-person version of our firm.
I learned so much about myself through our fundraise. I learned so much about our strategy. If I could go back in time and change a couple of things…
One was — and this is true of all fundraising — people pick up on things where you're defensive, and people pick up on things where also you don't have clarity.
When people would ask me: “Do you have a partner? Do you have plans of a partner?” I would give them this very meandering answer: “I don't know if I found the right person….” and most people were just looking for a simple yes or no.
There were some questions people had about whether some of the investors of our old fund were going to support me again.
One person pulled me aside and said: “You know some of these things are designed to elicit short answers like a yes or a no. These long winded answers that you're giving are not serving you. They're not helping you get to a yes.”
I wish I had thought more and gotten to more clarity on my own: “Hey, this is a single partner fund. That's a feature, not a bug. It's going to remain that way until it isn't.”
That's something you have to buy into and I think I wasn't really prepared to deal with all of the adversity and things like the rejection that it takes to raise a fund.
Over time, I figured it out and got a lot of support from my own community. And now I'm really proud of what we've built and actually, really proud that we've been able to stay true to the original vision.
I don't think I've ever convinced somebody to invest in Precursor. I've just found people whose mind was open to the possibility that this could work.
In the beginning, I wanted everybody to agree with me, and there was…you know, if I go back in time, I would say there was a lot of resistance to what I was doing and my initial instinct to that resistance was to just push harder.
Like, “Oh, they're resisting me. I'm just going to push harder.”
Anyone who's done athletics or anything knows… oftentimes the answer to resistance is not to push harder… in relationships too…
And I was like, “Oh, instead of pushing harder, I need to step back and understand: ‘Why am I encountering this resistance?’”
The premise of our fund is contrary to what many people think is successful. Me being more forceful and trying to make the argument is unlikely to work. What else can I do?
Well, I can try to find pockets of people who are at a minimum open to the idea that this could work and could be a good idea.
That really helped me a lot in my fundraise. Because it allowed me to step back and say: there will be people for whom this is just too much to believe.
I'll never forget—I pitched a big limited partner who has a very strong point of view that the opposite of what I do is the right formula: you should invest in very few companies. Those companies should only come through your network. You should be hyper involved in those companies, and you should own as much of them as you possibly can.
At the end of the pitch, he goes: “So, in order for me to say yes to your fund, I have to believe everything I believe is basically wrong?”
And I was like, “Oh, well, that wasn't my intention.”
But I realized… I've framed this for you in a way that you're kind of right. I haven't given you any space to continue to believe what you believe, but also support me in my journey.
A lot of what I learned was: how do you communicate an idea to people who are skeptical in a way that doesn't force them to reject their beliefs, but create space for you to bring them on your journey. That was not a skill I'd really had to exercise in other phases of my life, and it's probably one of the most useful things I've learned from starting my own fund: how do you navigate those conversations?
The other thing is: I found a way to make our fund feel differentiated. This was the other problem we ran into. People said, “You know, there's thousands of early stage venture funds. All of you sound the same: smart person with a good network and a clever idea. What makes your clever idea different?”
One day, I'd had a tough pitch, and I was in New York City, and I sat down with a little piece of paper and drew a little 2x2, which is the core slide of our deck. There’s two dimensions: what do I know about this person, and what do I know about this business?
Most people are unwilling to invest in the “I don't know much about the person, or the business.”
I started showing this picture to LPs and I'd be like: “Okay, we all know ‘You know a lot about the business. You know a lot about the person.’ Or, ‘There's a lot of signal—that's YC, repeat founders.’ We know how to do that in venture. There's ‘the person who doesn't have much traction, but is former colleague, classmate, neighbor, friend.’ Most people can see the way to invest in that person. There's what I call ‘strangers with data.’”
I just started asking LPs, “Who do you know who's investing in people they don't know without data?”
And a lot of them are like “Well…”
I was asking: “I'm trying to find this community of people, who are they?”
And they would say, “I don't know.”
I’d say: “We can talk about whether or not this is a good idea second.”
They're like, “Yeah, no one's really in that quadrant. And I actually know why: That seems hard.”
I'm like, “Well, it is hard, but it's also different.”
That was a big unlock for me. It just created space to have a conversation about our strategy in a way that wasn't as oppositional.
2022 and 2023 were eras where the amount of negativity that VCs were experiencing about their own business was coloring two important decisions that we all make: What new companies should I back? For most people, the answer was: the last thing I want to do is take on new companies.
Second, how do I think about and feel about the companies where I'm already an investor?
For the last two years, there was a lot of negativity around both of those decisions. I told somebody it didn't just feel like capital dried up. It actually did dry up.
For almost everything other than AI, volume was way down, and sentiment was pretty negative. Sometime around December last year, things really started to change.
When I say they started to change, it is not that they went back to the energy of total optimism. I think people needed time to process the investments they'd made, sort through their own portfolio, figure out what companies they were going to support.
That work was done a long time ago, but the sentiment of people getting back to feeling good about putting new money to work—that only really started happening at the end of last year.
I've been a venture capitalist off and on now for about 20 years and I tell people this reminds me a lot of the way people felt in 2003, 2004 after the Internet bubble burst. It took a while for people to say: there are good companies building on the Internet. We just have to accept that we might have made some mistakes in 1999, 2000 and some of those mistakes can be fixed, and some of them are simply mistakes.
What I'm seeing is in our portfolio: the companies that have good businesses, that have been capital efficient, that are going after venture scale outcomes are able to raise money. The ones who don't tick those boxes cannot raise. To some way, that's how it's supposed to work.
We overdid it on the upside in 2019 and 2020 and 2021, and we definitely overdid it to the downside for the last two years and I feel like we're back in this harmony to some extent.
But for founders it feels awful, it feels like the world's worst whiplash. You went from the enthusiasm of 2020 and 2021 to the doldrums of pessimism for two years, and now to something in between.
I spend a lot of my time trying to help founders answer a question that's hard to do, which is: what does a new investor think about your business? It's so hard to be objective about your own company, or even understand how an outside investor would look at your company.
Most of the conversations I have with founders today are: let's talk about your business through the lens of what's working and what isn't, and are you actually answering the questions that people care about today?
I have a team. First of all, The Grand is an important part of our founder support system. It's funny… I just talked to somebody—I don’t even think I’ve told you this.
For our last intake, we had one of our founders, who's a repeat founder, came to me and said: “I'm not sure this is for me. I've done some of what this sounds like before. And yeah… I don't know.”
I said, “Well, can you do me a favor? Can you go through the intake? Because I actually want to hear from you whether this is valuable. Because if it doesn't resonate with you, that's good feedback for me to know that, as we work with repeat founders, I should think of them differently.”
He went in, I would say, slightly skeptical, and we had our check-in yesterday, and he goes: “I'm glad you pushed me to do The Grand. It was awesome. I've had a subsequent follow on session with Jeanette to talk about communication, interpersonal communication.”
He was the person where I was like… “You're the person whose feedback I wanted the most, because you were the one who went in with the most questions.”
He's like, “I've already gotten so much out of it. If nothing else happens, it's already been worth it.” So that literally happened yesterday during our one-on-one.
This is probably a longer answer than you asked for, if you'll indulge me.
When I started the fund all these LPs would ask me: “Well, how are you going to help all of these founders?”
I think their notion was the founders that we work with needed me to come in and do stuff in their company, which is absolutely not true. No one needs me to come in and write a product requirements document. God forbid I touch code, design. They don't need that.
What I've come to realize is: most of the founders I work with need a couple of things.
They need somebody who can help them remain accountable to their vision and hold up a mirror sometimes and say: “This is what you told me. You wanted to build this, what you told me you wanted to achieve.” Let's look in the mirror together.
Sometimes founders need connections to resources, introductions.
But I've come to believe the thing founders that I work with need most is community and it's my job to facilitate that. Not to be that, if that makes sense.
I spend a lot of time figuring out…how can I? Probably the most humbling thing is: half the things people bring me as questions… as a VC, I'm like, “I could answer that. I could also just put you in conversation with another founder.”
Last night, I talked to somebody who's going through a very difficult co-founder… It's going to end up as a breakup and he's like, “What advice do you have?”
I said, “Well, I can give you my general view on this. I've seen probably a hundred of these at this point in my career. But I think what you really should do is… if you'll give me a minute, I'm going to text two other founders who went through this six months ago. They're on the other side, and I think what would be more valuable for you is to actually talk to them. They can tell you what they did, what they wish they’d done differently, how they talked to their team about it, what went well. What you really are searching for, it sounds to me, are more tactical answers. than I can give you.”
My poor assistant today was like: “Your calendar is crazy, what is going on? All of these founders have asked to skip the line, and they don't want to wait.”
I said, “People right now are under a lot of stress.”
I feel fortunate that they feel like talking to me can help them address that stress. But my job is to be available—and, availability is a big part of being a VC, and part of my job is to try to help connect people with the resources that they need when they get stuck.
I don't have to be the answer. It's totally fine if I actually am not the person to help you with this issue. The right person to help you is somebody else in my network, or another founder. Or, let's brainstorm together who we could put you in touch with that would be a valuable connection.
I build a little coaching plan for every founder of my own which is: based on what I know about this person, what are the areas that we should probably focus on?
Sometimes it's like, this person's really strong at this. I want them to leave the time where they work with Precursor feeling even more confident in this strength area. And, these are maybe some development areas that we should probably try to work on in our time together…because people graduate from working with Precursor. We're very focused on zero to one. People graduate from spending a ton of time with me. But I want to help them leave in a better state than they were when we started working together.
And so I have a little coaching plan for everybody, and oftentimes it is around the things that come up in The Grand.
I guess I've always believed that founders are like the secret magic ingredient to startups. I have this view that all startups are these amplification devices for the idiosyncrasies of the people who run them
So, whatever you have inside of you, it will show up 10x at your startup, including my own venture fund. Part of what I want to do is: if I can help people become more aware of their own tendencies, who they are as a person—they will better understand some of the behaviors and tendencies and culture that's developing in their startup and they will have a better understanding of: “Well, where's that coming from?”
I find a lot of the founders I work with, they've never really done anything that's self-reflective to the level that you need to be to understand who you are. So I try to work with them to start them on that journey. And The Grand is a big part of that.
I also think so much of what I'm trying to help people do is to become better leaders and everybody starts in a different place.
So I would say, a lot of the outcomes I've seen have been spontaneous admissions by people in our portfolio. They’re like: “Oh, I can't tell you who's on my Grand Council. But I had this issue, and I took it to my group and I feel that's how I got through it.”
That's the reason I keep doing The Grand—because the founders in our portfolio will tell me specific situations. Oftentimes it comes down to a couple of things.
I didn't realize that when I was presenting or talking to people about Subject X in this way, that the way I thought I was communicating is very different than the way they were receiving it.
Or, I didn't realize that the reason I'm having so much conflict with this person of my organization is that we have different beliefs and values about this subject or topic.
It is the epiphanies that they'll tell me about, where they're like: “I was stuck on this issue, and I only could view it through one lens, and by being in conversation with the group, I was able to shift my perspective and see the root cause of the issue through a different lens and better understand.”
I’m watching people have these little breakthroughs and it's so hard, especially for first-time founders, when you don't have that well of previous experience to draw on and maybe none of your friends or family are founders.
Maybe your spouse or partner is not a founder. It can be hard to talk about things you're trying to solve. Because everyone's like: “I don't have that problem. Never solved it, never seen it. Can’t relate to why it feels so weighty to you. And that's really a thing. I've come to see that. We've made over 400 investments now at Precursor. And there are definitely some themes.
The other thing I've told a bunch of my peers is: I don't care how nice of a VC you are. I'm pretty nice. There's always a power dynamic between you and the founders, because you gave them money, and, not that they work for you, but you've invested in their company and no matter how much they like you, and trust you, there will always be certain conversations that are probably not appropriate for them to have with you first.
I'm a big believer that you have to give founders—even if they like you and trust you—you have to give them space to get those problems and issues resolved without you.
This is one of the things as an industry we've missed in all this talk about being founder friendly, being nice. It's all true. You should do all those things, but you should also acknowledge that the power dynamic is real, and there will be moments where, at best two two people could acknowledge that it exists and still discuss the issue.
At worst it becomes a blocker to having an important conversation and to pretend that that doesn't exist is silly and counterproductive. I'm a big believer that I don't expect every founder to bring me everything all the time. I want them to have a space where I don't exist. I'm not present. I can't see what's happening. They can workshop things. They can express things that are thoughts in process, share things that they're not sure they want to share with me. I do think those spaces are really important for founders.
A lot of them tend to think about some level of coaching, learning development as they get larger. The bigger thing I try to teach founders—and the best ones intuitively get this—which is: the culture that worked for your company at four people is probably different than the company that works at 20. It doesn't mean you have to abandon your values, but your rituals and practices need to change as your company gets bigger, because you can't just get everybody in a conference room. You're not all working in the same open office where everybody can hear everything. Not everybody remembers the product review meeting from two years ago.
A lot of what I find is: when people come to me and the culture feels off, I'm like: “Well, let's look at what the company looks like today. Are you still trying to run the company using the management tools that worked when it was a quarter of the size?”
They're so busy running and operating that they don't think: “Oh, yeah, like, this company is a lot different.”
When I get an inkling that that's coming, I will put them in contact with somebody who's usually a stage or a stage and a half ahead of them in company development.
Because, again, going back to our previous theme, oftentimes those people can say, “Let me guess, these are the things that you're observing in your company.” The person's like, “How do you know?” “Because I had the same thing in my company 18 months ago…”
I try to give people more than one story. I’m like, “Let me give you a handful of people who've navigated this so that you get a variety of perspectives and how you can push through this.”
But I do also tell them: at some point, you're going to have to educate other leaders in your company to be able to deliver these messages for you, because, increasingly, there will be layers of people between you and individual contributors, and you have to figure out how to create these cultural ambassadors. But also, you have to figure out how to create space for people in your company to do the kind of thing you're doing with me, which is to learn and grow and share.
So a lot of them will look at things like The Grand. They will look at creating ERG’s or affinity groups. But a lot of what I tell them is: do we have the right management practices in place given the size of our company?
I am now the only person in our San Francisco office every day. One day I realized either everybody's going to have to come to me or I'm going to have to start getting on the road a bit more to see some of my teammates. Now, I have 3 people in LA. I now go down to LA. Starting this month, I go down to LA once or twice a month, just to co-work with my teammates.
It’s not designed to be like: “Oh, you're getting a review.” It's really just to co-work with them, and instead of asking them to come up here, I'm just going to go down there and meet them on their terms, in their space and be a part of their life down there.
And I do the same thing for my teammate in New York.
But that only came up because one day I had a lunch in LA, and my team was like: “This was really fun. It was great to have you down here.” I was like, “Yeah, but I'm the boss, whatever…” And they’re like, “No, it was actually really nice to have you come down here and hang out and experience what we experience every day.”
It made me realize that would be a good culture reinforcing message and way for me to get to know them better, to come down there and spend time with them, as opposed to always having them come meet me at HQ.
We also do a quarterly retreat, and we've had you all come in and facilitate sessions before as part of those. We always try to do something fun as a group. We've done an online escape room, which I highly recommend. We've done sushi making. We'll have somebody on our team, teach everybody else how to do something. We had someone on our team who taught us how to make homemade biscuits, that was pretty fun.
I feel like I have to work a lot harder as a leader to make this connective tissue work because our teams are distributed, and it's not just my relationship with each person. It's this web of relationships. How do I make sure that everybody feels connected? Not just me. Feeling connected to each individual.
ANITA HOSSAIN CHOUDHRY: It sounds like you've brought in a lot of intentionality into that and not just assuming: “Hey, everyone's going to come to me?” How do I meet people where they're at and the support that they need to to really amplify that connective tissue?
Kind of funny: in the beginning this was a moot issue. We simply couldn't afford platform services, so it was moot. I actually went and spent a day with the First Round Platform team and asked them: “What do you all do? How does this all work?”
My conclusion was: this is a very significant financial and operational investment if you want it to be done well.
So my general view is: you should either do platform services very well or not at all. The intermediate outcome is actually worse than doing nothing.
There's all these other challenges like… how do you have one talent partner? How do you ration one talent partner across the whole portfolio? I would say, the self-serving thing is: you put that talent partner on your best company.
I'll never forget. I met somebody who was a talent partner at a big firm that was an early investor in Airbnb, and the person said, if I can hire this one person for Airbnb, it could create $100M in enterprise value for the company, so I'm spending all of my time on this one—wow.
I have a whole bunch of theories that it's less about adverse selection for founders. It's more that it's hard to satisfy people with the platform team, because inevitably there'll be people who want to consume resources from the platform team, and they won't get them.
I’ve always felt I don't want to create disappointment in our founder community.
I also think there's a whole bunch of things that founders just have to learn how to do. I'm pretty direct about that. I'm like, “I would love to help you hire, but that's not a substitute for you learning how to attract talent to your company, because if you're a founder, you are going to be sourcing, selling, and closing talent for the rest of your life. That is a core skill, and if you don't learn it now, I don't know when you're going to learn it.”
So what I tell people is, instead of having this huge sourcing operation for you, I will help you close anybody that's close or I'll help. I'll give you a second set of eyes on a candidate if you're not sure the person's the right fit, and I probably do one or two of those a week across the portfolio.
I'm very much “teach a person to fish.” There's a bunch of things you just have to learn how to do, and even if you're not good at them, practice will make you better, and you don't have to become the best. But you have to get above the minimum bar to be a successful founder, and I think in some ways what platform’s done wrong is it can rob founders of that learning opportunity.
This is probably the area where I've spent the most time in the last three years. I have somebody that I work with who helps me think through a lot of things at Precursor. There's two principles I operate with, but one is: I want the best for people in the long term, which means I have a fairly high tolerance for short term conflict in service of the long term.
Second, you cannot have difficult—at least, I can't—have difficult conversations with people without a base layer of trust.
So, step one is: I need to build trust with these founders well before I need it.
Which is why I try to have a regular cadence of meeting with people in the beginning, because I don't know them. Most of the people I invest in, by the construct of our fund, I don't know most of them. I have to get to know them, and I have to create the conditions under which they believe that I care about them—because I do—and that they believe that I have their best interest at heart, and that anything that I tell them, whether it's positive or negative, will be coming from a place of wanting them to be better and wanting to be successful.
That doesn't happen the day you wire.
I need to get to a place where I feel like we have a baseline layer of trust and understanding between each other.
I now have the possibility of sharing some tough feedback with somebody if I need to.
Also, with their permission. Sometimes I'll ask people: “I have something to say. I'm not really sure this is the right environment, are you in a place where I could share something with you that I'm not sure how this is going to land for you?”
Sometimes people say, “Not really, not today.”
I'm like, “Okay, cool. It's good to know.”
Second, I've told a bunch of people in the last year: we're not going to invest in your next round. That stings when you hear it. There's no getting it right. It's not good. I can't sugar coat. I can't dress that up as if it's an opportunity. It's bad news.
But it's bad news delivered honestly, and what I found is that when we have trust upfront and you deliver a tough message in a way that's like… You don't want to say: “Your company stinks. That's why I'm not giving you money.”
You say: “Hey, for a bunch of reasons, we're not giving you money.”
I find that you can move through the awkward difficult part of that conversation and come off the other side as long as you're willing to accept this person might be mad at me for a month, because I'm not doing their round. But on the other side, you can move forward.
Every time I have not had those two conditions, it’s been a disaster.
It's either been like: I told somebody something they weren't ready to hear. I told somebody something that they didn't feel like I had permission to say to them. The relationship wasn't supportive of that level of honesty, or we didn't recover from it, because, it was too much too soon.
The hard thing is: sometimes there's things I really want to tell founders. And we're just not ready to have that…I'm not ready to have that conversation with them. I don't think they're ready to have that conversation with me, so I'm going to sit on this for a little while and see if it still feels as urgent. The next time we talk.
It's taken a lot of practice. I still have plenty of room to improve, but it's taken a lot of practice.
And [The Grand’s SBIO] tool is super useful. I actually share it with a lot of founders when doing difficult conversations for the first time.
Eventually every founder I work with realizes that hiring is the the single, most important, and highest and best use of their time. They all come to it clear from different places. Some people intuitively get it right away. Other people want to spend other time on product or want to spend all their time on sales, or want to spend all their time on whatever their super power is.
Eventually they realize the company will not grow or scale unless they find the best people, and the best people for their culture and the best people for their stage.
The very best founders in our portfolio are always asking: “Do I have the right people in the right place, given where we are with the company?” And if no, “How do I find them?”
The best founders in our portfolio are always recruiting and sometimes it's just passive.
It’s funny, I just talked to somebody last week where they hired a VP of Marketing. Two years ago they met this person and were like, “Look, this person is not at all stage appropriate for where our company is.”
But they've kept a relationship. This person's been an informal marketing advisor for the company. Now it’s VP of Marketing, and that founder started that relationship two years ago, and this person has probably 20 of these people that they're talking to in various future roles, partially for advice, but also partially to get to know these people and figure out: “Are these the right people to add to our company at some point in the future?”
This founder probably spends 10% of her time every week cultivating and nurturing these relationships, and it has really paid off for her. But it's one of those things where you have to be committed to doing it consistently for a long time.
Also, we have so much founder turnover and one of my LPs always asks me: “What do you do if you don't like both of the founders, all three of them?”
I try to be very clear: which of these people am I really underwriting? In the case of The Grand, it was easy. I was like, “I have a very good feeling about both of the founders.” But I have some companies where I look at the cap table, and I'm like, “One of these people is central and if that person left, I'd be very concerned about the future of the company. And if their co-founder were to leave, it would be sad. But I wouldn't be as worried. It wouldn't feel as existential.”
That was not a popular view when we started telling people that 6 or 8 years ago…“Well, it's the whole founding team.”
I'm like, “Yeah, it is. But…I mean, the other thing that the article talks about too is: most of the churn we see in co-founders is actually the technical people, because, if you think about it, you only have two choices. You can either be the most technical person in the company and be the CTO. Or you can lead the engineering function as a process management systems person. If you can't do one of those things as the technical founder, it's really hard to scale with the company.
Not as soon as I would like. Oftentimes what happens is you'll have some function where you just can't find the right person.
We have a company that's on their fourth VP of Marketing.
I was like, “We've hired really awesome people in marketing. None of them have stuck or worked. We should probably take a step back and try to figure out: ‘Why is this role so hard for us to fill?’ Is there something about the product or the company's culture or the level of resources that we're applying to marketing that's making it very difficult for people to succeed in this role?”
Upon further inspection, there's some company issues that need to be addressed in order to have a marketing person succeed, and we don't have those resources at the company right now.
It's been really interesting. But I also feel like things only change when founders believe that they have the answer to the root cause of the problem. Me as a VC knowing it doesn't actually do anything unless I can communicate that to the founders in a way that it caused them to take action.
There's actually some really practical stuff. I always ask people: “Does the outcome of this company matter as much to both of you?”
I've had some cases where for one person, it was their life's work, and for the other person it wasn't as deeply meaningful. I’ve had other cases where one of the founders was just a lot wealthier than their co-founder, and the economic outcome wasn't as critical to their quality of life, psychic well-being. I had one case where, one person had already had a big win and the other person was still looking for their big win, and it wasn't as much about the money. It was about the psychic need.
So, I always ask people: make sure you all are similarly situated and want slash need the same thing out of the company.
Then a lot of it is values stuff. Do you value the same things?
The third thing is: have you spent enough time together, and thought about your own communication?
My co-founder and I used to do: every Friday we would go out and have drinks. For the first 10 minutes I'd say, “What did I do that annoyed you this week?” and then he would. Then I would do the same thing.
Then we’d spend the next 40 minutes talking on: “Well, what do we want to do better as a pair next week?”
But I think it was really important to just give him a weekly escape valve. To just say: “Just stop doing that… just like stop doing that.”
There were lots of things I did that I was like: “I didn't realize that annoyed you.” He was like, “We were busy. We were in the middle of a product review…”
We just figured out that it was better to have this regular pressure release thing away from our team, just the two of us on a regular basis, and we disagreed. We're just not going to fight in front of our team.
We had just a bunch of values and agreements between the two of us, kind of like in any relationship, and we're just going to abide by these because we think this will make the best company.