At Precursor Ventures, we work primarily with early stage teams, many of whom were at the prototype or early traction stage when we first invested. When I was fundraising for Precursor Ventures Fund I, one of the most frequent questions I got asked was how we could support a relatively large number of investments with a very small operation. It’s something I thought about quite a bit before starting the fund. With the benefit of time in market and some investments under my belt, I have a much better sense about how to articulate the support model at Precursor.
There has been a lot of ink spilled about how important it is to get money that is more than “just money” and there are many venture firms that are investing a lot of time, energy, and money in building platforms that can truly drive meaningful outcomes for founders. I admire what those firms have built because it works and it’s authentic to them and who they want to be.
We are at the other end of the spectrum. We are very platform light, and work directly with founders to create great outcomes and believe this is our key for ultimately driving success. This is in large part due to the fact that with more than 50 investments made on behalf of Precursor, I have observed the following traits in the founders we have backed:
1. They are driven to create something they believe needs to exist. They come to Precursor with a clear vision for what they want to build and why, even if they haven’t sketched out every detail of the plan.
2. They are not looking for an investor who will meddle in their day to day operations or be a babysitter when it comes to the daily execution of the business. Rather, they are looking for a supportive partner who will be there to help them think through important questions about the business they are trying to build.
3. They have unbelievable capacity for leadership and decision making. For some, they never had jobs or roles that truly push them to fully utilize that talent. Being a founder might be their first chance to truly exercise that muscle. Starting a company is their first chance to fully explore this part of themselves.
What We Look For In Founders We Back
As an investor, I think you also have to have a theory or philosophy on what drives success in startups. At Precursor, we are looking for founding teams with four key attributes:
1. Compelling Vision. Founders must have such a high quality of vision that it inspires others to join them and provides them with clarity surrounding the landscape in which they operate.
2. Interesting Market. The second most important thing, after the founders, is the market they have chosen, their sense of timing around market conditions, and their unique insights on what it takes to succeed in the market that they have chosen to pursue.
3. Comfort with Uncertainty. Building a successful startup will involve making stressful, difficult decisions with limited information on a frequent basis. This is a skill that can be learned and improved upon over time with practice.
4. Desire for Personal and Professional Growth. One of the most important things we can do is to give founders the opportunity to grow as leaders and decision makers. Helping founders get better at making difficult decisions with limited information is a durable, useful skill in startups. That is a skill that will serve them as they grow beyond the stage where our input is most relevant.
Startups and Personal Growth Go Hand in Hand
Starting a company, or anything for that matter, will stretch you in unimaginable ways and require you to get comfortable making tough calls and learning to do things that do not necessarily come naturally.
Having had the opportunity to work with many startups during my career, I have a deep belief that being told what to do is not a good substitute for doing and experiencing a key decision for oneself. This is particularly true in the domains of hiring, firing, fundraising, and selling.
As an investor or advisor, it’s tempting to do things for people, particularly when you have more experience than the person on the other side of the table. This is a trap that needs to be avoided. Founders and management teams must make and own the difficult decisions that confront them. Practice making difficult decisions around hiring, firing, strategy, and operations builds confidence and makes subsequent decisions easier. However, a byproduct of allowing teams to practice making these decisions and is that teams will make mistakes along the way. Doing things for people that they need to learn to do themselves feels really good in the moment but ultimately works against their opportunity to build capacity and grow as leaders in the long term.
We realize that this is a different point of view than some of the more activist, involved perspectives that other firms espouse. There are many ways to be a good investor, but I think our approach has some unique requirements on Precursor as a firm. Our role is to be a supportive, trusted partner that supports entrepreneurs in their growth. To that end, we have to consistently do several things:
1. Build strong relationships with founders that they think of us as a resource and seek us out when they have questions or want our input.
2. Know enough about our portfolio companies to have context on what they’re doing and what challenges they face when they come to us for help.
3. Be self-aware about our own biases when we offer founders advice, input, or counsel.
4. Have a sense for the founding teams we’ve backed, including their worldview, biases, tendencies, strengths and weaknesses.
5. Create space for founders to make and own the important decisions that will impact how their companies develop and grow.
6. Be a supportive, engaged listener whether the news we are hearing is good or bad.
7. Be responsive and available. There are issues that startups face where a timely response is infinitely more valuable than a response that happens days or weeks from the time where a decision needs to be made.
Avoiding the Need to Feel Needed
In our view, the companies we back will go as far as the founders and teams they assemble take them. To that end, we think about our value add in a really specific way:
1. There are some teams that will need or want relatively little day to day support from us. That’s an acceptable outcome given our model, so long as the teams we back know that we are there for them and have their back when needed.
2. We will have periods of intense interactions with founders where it feels like we are helpful and making a difference for the teams we have backed.
3. The value of our input and support is ultimately judged by the founders and their teams, not by how it makes us feel or how useful we believe it to be.
4. If we are doing things correctly, the teams we back will seek us out for the set of issues and items where we can provide the most benefit. Having founders rely on other investors, advisors, or colleagues for advice in areas outside of our expertise is expected and welcomed.
With all of this being said, there is still a role for prescriptive advice. There are some areas where, as a firm, we have strong views around what someone should or should not do. Within this fairly narrow set of areas where we believe we know a lot and have strong opinions, we will share them without reservation.
Where We Lean In and Get Active
There are four key activities where we, as a firm, believe we can make a difference in helping founders and management teams succeed with their businesses. We spend the majority of our time working on these four areas because these are the four areas where entrepreneurs have told us that our time, energy, and input have made the most difference to them:
1. Fundraising. One area where we believe we can make a difference is around fundraising. We are committed to helping founders close out the round we join as well as helping founders prepare for the next round of financing. Fundraising is an area where we think we can add a lot because we get to work with dozens of companies that fundraise every year and can bring our relationships and network to bear. This can be anything from helping a founder think through how best to put together the fundraising story to expanding the list of firms to approach.
2. Closing Key Candidates. We are happy to help founders close key candidates who are considering joining their companies. We are of the mind that good founders and management terms should be able to source and close individual contributors. However, we are happy to help close key hires in situations where a call or perspective from an investor might tip the scales.
3. Sounding Board for Important Decisions. As we mentioned earlier, we believe strongly that founders need to make and own the important decisions that will impact the outcome of their companies. That does not mean, however, that we are unwilling to engage in thinking through these issues. We think it is an important part of our job to help founders think through difficult decisions and choices and make sure they have thought as deeply as they can before they decide what to do.
4. Non-judgmental Emotional Support — Not everything goes well in a startup. When things go wrong, we want to be there as a source of non-judgmental emotional support. The life of a startup founder is full of ups and downs and the last thing a founder wants when they hit a rough patch is someone who amplifies the stress they are already feeling.
If you are a founder looking for a partner to help you build your business and this model resonates with you, I encourage you to reach out to us. We’d love to meet you.
P.S. Thanks to the many founders who helped me refine these ideas and read this post prior to publication.