The Advocate: A Different Way of Looking for Your Investors
Why Founders Should Seek Conviction from Investors
Hi there, Venotes Reader! I know it’s been a while since I’ve shared my thoughts with you—but my weeks away have given me a lot of perspective that I’m looking forward to sharing. I will say, I’ve really missed connecting with the Venotes Community, though and I’m excited to be back.
But first a few updates!
In the past few months, I’ve made some fun life changes including moving to NYC and starting a new job! So to be more consistent and balanced I will be sharing my newsletter once a month.
To supplement though, I’m opening up a Calendly so we can connect more personally and I can help with things like investor intros, pitch deck reviews, etc. I’ll mainly have weekend slots, but if you’re interested, please check it out here!
Also, if you’re interested in some of my other ideas and posts I reopened my personal site: Jasminvests. On the site, I hope to aggregate some resources from different folks in the startup ecosystem that are useful for founders, aspiring founders, and aspiring investors. I haven’t started to curate that content just yet, but will update you as I do!
Now for the topic of the month.
The topic I’m writing about today has been on my mind ever since I saw this post from AngelList founder Naval Ravikant’s on Twitter:
When I saw this tweet, I initially disagreed. As a venture fellow focused on underfunded female founders and founders of color, I recognize that many entrepreneurs are just looking for the capital they need to continue operating and growing their businesses. It’s unfortunate that the disparities in the system have made it such that underrepresented founders don’t always feel they have the luxury of considering whether money is good money when seeking investors.
But at the end of the day, I want to push the conversation about looking for great investors forward especially for Black, Latinx, and female entrepreneurs because it can radically change a founder’s access to resources including capital down the line, key partners, and general support.
First, let’s define what makes an investor great though.
Good VCs are well-connected, well-versed in growth and strategy, and discerning. But great VCs, are all of the above, and advocates for their entrepreneurs and portfolio companies. This position of advocacy is a function of their belief in the team and the company. When an investor and founder share a vision for the company and similar conviction about its future, a few amazing things happen:
The founder has full access to the investor’s contacts, resources, etc. without reservation from the investor, and is even able to reach second or third degree contacts and resources. It feels like the world opens up.
The founder is able to execute unimpeded by risk averse guidance or instruction that comes when VCs don’t really believe in a company or its management team. The founder is also able to operate without dealing with other kinds of friction or static from investors that are not conducive to long-term success.
A halo effect comes into play. With investors advocating on the behalf of the startup, the startup is perceived differently by other investors, key partners, and in some cases the broader public. This reduces barriers to future investment and legitimizes the company further for conversations with corporate partners.
And I honestly believe this is true across stages—from pre-seed to buyouts. The reality is that in the same way that having a bad manager can disrupt your career progress and hinder your advancement, accepting money from investors who don’t align with your vision or believe in your company can be a fatal mistake.
But how can you tell a great investor?
A few years ago Rodney Williams, founder of LISNR, wrote this piece for Forbes that outlines what a great investor looks like in the context of his own fundraising experience with Marlon Nichols of MaC Venture Capital. In essence, he outlines that you find great investors in those who understand your business, share or support your vision as founder, have a history of actively supporting their portfolio companies in reaching those goals, and have the resources to do so.
To determine these points, consider doing the following the next time you speak to an investor:
Ask about their experience operating or supporting startups in your space.
So often, I’ve heard of founders frustrated because an investor clearly did not understand what their company was doing in a pitch, and dinged them for it. On the other hand, if the investors do invest, you’re now continually fighting an uphill battle because that investor doesn’t understand the market in which you operate enough to provide solid guidance or feedback, but also doesn't trust your expertise enough to not micromanage. This is the kind of unnecessary friction that you want to avoid.
Ask about the ways in which they typically support their portfolio companies.
Some firms are more directly engaged than others. For instance, Hustle Fund lays out the ways that partners typically support founders, and how the expertise of the GPs can be useful for a pre-seed company on Zoom calls with founders. They are also one of a few firms that I know that have an internal curriculum to help founders better understand and utilize, metrics, sales funnels, and data. Always ask how a firm can support you so that you know what to expect from the relationship.
Connect with other founders or people who can speak to their own interactions with the investor.
I will sum this one up simply. Being courted by investors is just like dating—please know who you’re dealing with before they’re on your cap table.
And if you’re a founder actively raising or looking to raise a round soon, I hope that these points are useful references in your interactions with investors.
Next month, I’ll tackle a topic that’s long overdue: all the ways to finance your startup. In the interim, you may hear from me with site updates or other blog posts that will be on my site. But until then, stay safe and let me know your thoughts!