The Stewardship of Capital: Early-Stage Investing, Founder Centricity, Strengthening Trust, and Supporting Founders

My experiences as a founder, investor, and advisor have been a guiding light as I focus on helping founders succeed. When I built my first company, I didn't know what an appropriate capital structure looked like, for example. While I was certainly passionate, I was also young and inexperienced.

Fortunately, I had access to an incredible support network in Silicon Valley— people and groups of people who operate from a place of high integrity, deep founder centricity, care, and the authentic desire to make the world a better place with technology. So, I learned from the experience and carried on.

Unfortunately, not all founders in the startup and entrepreneurial ecosystem receive the right support they need. While venture, for example, has created many winners, there are also many entrepreneurs who were burned in the funding process — for example; having their businesses undervalued, unfair deal terms, and  firing founders without process during a raise. These founders aren’t talked about as much, re-engaged with properly, and supported.

No surprise, there is a huge movement that’s underway that is questioning— attacking, even—  the relevance of Venture Capital (VC) funding with headlines such as:

  • "Do you even need venture capital?"

  • "Just don't take VC money, period."

  • "Why you shouldn't take VC money."

The damage goes both ways— there are a lot of great VCs doing great things to help up and coming founders and their portfolio founders. However, they must invest even more significant efforts to cut through the negative perceptions that the VC industry currently has as a brand.

Because of my interest in the stewardship of capital, I often ask:

  • How can we make it more transparent, who the good guys are— the investors doing the right thing— so the right founders can find them faster, easier, and fuss-free?

  • What investor behaviors demonstrate founder centricity, and what practices do not?

  • What can we— investors, advisors, and VCs— do to strengthen trust with the founder community (new and existing) and help create amazing hyper-scale businesses that return capital to Limited Partners (LPs) and create wealth for the teams?

As investors, advisors, and mentors who genuinely want to enrich the entrepreneurial ecosystem, our ongoing challenge is to strategically steward capital and people in a way that the resulting venture (business, fund, organization) is:

  • Aligned with people’s best interests and talents.

  • Supported by the right people, including investors, employees, teams and other key stakeholders.

  • Grown at the right pace and at the right time.

  • Structured with the best chance to succeed and scale.

In this post, I share some of my perspectives and thoughts. I also look forward to hearing your thoughts and questions and learning from your experiences too.

Founders Have Great Leverage

With the ubiquity of information, social networks, and funding platforms, founders these days are getting savvier and savvier about whom they choose as their investors— they can:

  • Gain funding without ever needing to approach an investor or VC, with crowdfunding platforms like Indiegogo.

  • Learn about cap tables and anything else they need to execute their vision by ‘Googling,' watching videos on YouTube and Vimeo, and reading articles on many journals and magazines (e.g., Medium, Forbes, and HBR).

  • Vet investors using social media platforms (LinkedIn, Facebook, and Twitter) and platforms (AngelList and Crunchbase).

  • Perform reference checks quickly and affordably, via with The Funded or Signal, or directly reaching out to a network of other founders to elicit their feedback.

  • Find, qualify, and hire talent for their businesses, that includes experienced advisors who are aligned with their vision and values.

  • Use the fundraising process to gather critical and invaluable feedback on their business, pivot, and grow without having to give away any ownership in their company.

  • Join a very tight-night community of founders that coach each other, and share advice, advisors, and other resources.

Just like the power is in the consumer's hands to decide which brands, products, and services they spend their time and money on; the ability to determine which investors to go to is in the hands of founders— this is a good thing.

As investors, I believe our role is to be as transparent and as helpful as we can, recognizing that great founders with great businesses might not need our money or support at all. Moreover, when they do need us, we are there to amplify their existing efforts (speed, efficiency, and scale).

If an investor doesn't honestly care about founders— the contributions they can make to people's lives, and making a positive difference— they probably shouldn't be in the investing and venture business. While early-stage founders require a certain naivety to build a great company, they also learn fast and catch-on quick. That means if some investors—  

  • Want to juice founders and their companies.

  • Pay lip-service to get founders on their side and fail to fulfill promises.  

  • Manipulate founders in the first meeting and pressure them to make an expedient decision.

— Word is going to get around faster than the speed of thought. The same is true if we do right by founders, pre-seed to scale, and beyond. If founders know and feel we are consistently working in their best interests, then it will be within their interest to continue working with us.

The Founder-Centric Vantage

I love the passion of early-stage founders— they see something that others don't, they want to make that vision a reality, and they want to deliver mind-blowing customer experiences.

However, who are these founders, specifically? Their talents and potential aren't always so easy to identify. For example, electrons and protons aren't visible to the naked eye. However, fire them through the Earth's magnetosphere, and you illuminate our night sky with a light of varying color, complexity, and beauty.

Founder potential is much the same— given the right operating conditions and direction; founders can commercialize innovations, share them at scale, and improve the experience of being human. I’m excited to focus my efforts, collaborations, and contributions ongoingly, to create paths of least resistance for these founders to succeed.

To effectively achieve this, I believe it comes down to consistently building trust and demonstrating authentic care and attention. As an investor and advisor myself, I've reviewed a countless number of summaries, pitch decks, cap tables, and advised hundreds of entrepreneurs—there's no shortcut— it takes clarity of intention, efficiency, self-awareness, and a personal touch— this means doing the following for potential portfolio founders, for example:

  • Getting to know them personally; what matters to the founder? What do you do to care for their mental, emotional, and physical health? Who are the important people in your life, and what do they need from you?

  • Being transparent about your process and your expectations. For example, “We are going to have three conversations, do some background checks,  then we’re going to make a decision.” Alternatively, “We may require additional meetings— but we will let you know.” Founders will appreciate that.

  • Being clear and transparent about your value proposition beyond just capital. For example, "You're going to get weekly coaching, you're going to get access to a specific network of specialists in your industry, and our director of founder success is going to check in with you regularly to ensure your expectations of us are met."

  • Responding quickly and thoughtfully, whether that be with a resource, referral, or words of encouragement. For example, even assessing and reflecting to them what you believe their key talents and strengths are, what roles and responsibilities they are best suited to, and what sort of people to look partner with.

  • Taking strong note of key issues entrepreneurs and founders face— some are obvious, some aren’t. For example, there's a lot of burnout in Silicon Valley and concerns around matters of mental health, but there is also a stigma associated with it that disallows founders from openly expressing their concerns and asking for help.

The list goes on because just like startup ideas, products, and services are abundant— ways to deliver bespoke founder support is plentiful too.

  • What do founders need at this moment?

  • What resources can we provide that will be of assistance?

  • How can we track their well-being and be proactive with our support?

  • Are some founders better off in another fund’s/investor’s care?

  • What are our operating assumptions that are limiting to a founder’s success?

  • How can I help facilitate connections that will truly impact the startup?

Similar to effective user-experience design, founder-centricity is about placing founders at the center of our efforts.

For example, I think a lot of what founders are asking for these days is connectivity to people who understand specific problems and markets very profoundly. So, I think creating a business development (or corporate development) database of people (advisors and specialists) is a significant value-add— many great funds already do (a16z is a good example), and I'm excited that more and more are following suit.

Respecting Your Needs As An Investor

Sourcing investment opportunities, investing, and supporting portfolio founders at scale requires concerted, focused, and consistent effort. As such, just like founders, investors and VCs are incredibly susceptible to burn-out too.

For example, during my time at 500, I was leading deals, investing through the accelerator, supporting companies, and raising capital from LPs. I was working long hours, on the road always, away from my wife, family, and friends, and my health/fitness suffered.

I think as investors, we must also be thoughtful about our portfolio strategy and personal well-being. For example, doing more for founders for the sake of doing more isn’t always the best decision. We must respect our time, energies, and efforts.

In interacting with founders and being transparent, I think it is essential to make clear that we are human beings too, and while we are doing our best to be the best for them, we recognize that we have opportunities to improve as well. We are all in the business of augmenting human lives, and that also includes our own.

I think one of the simplest and best ways to humanize and strengthen the relationship dynamic amongst investors, VCs, and the founder community— is to throw parties, get people together, relax, and have fun. These events and social experiences help provide us all perspective— we are all human beings wanting to have a good time and sharing the same ecosystem—I think it is important not to lose sight of this basic fact.

Adopting Technology to Amplify Human Efforts

There are no shortcuts for delivering bespoke value and a personal touch to founders at scale. However, technology can amplify what makes us human.

Technology is there to help us augment what we do well, assist with what we don't do so well, and to do so repeatedly, reliably, and at scale. Working with our nature; technology assists us to be more aware, connected, and expressed as humans, not replaced.  

For example, Technologies such as Affinity.io and Superhuman are simple, elegant, and useful for building networks, managing communications, and streamlining productivity. Furthermore, when we leverage human augmentation technologies coupled with tight processes, we can support many founders in a way that will blow their minds.

For example, I think The First Round Review has done a great job with creating long-form, thoughtful content. Building on that, how can we take great content and help develop bespoke recipes for founders to assist with their essential business functions such as hiring, fundraising, aligning stakeholders, for example?

Recipes are processes that are fungible, flexible, and adaptable to each unique person’s situation. They also offer high efficiency— scale efforts, measure progress, absorb useful feedback, and pivot. You can follow the track ahead of you, move quickly, and stress less about things you shouldn't be worrying about. By having a process, you can focus on the tasks at hand that require very human qualities such as:

  • Connecting with the person you want to hire.

  • Growing and developing people with less worry about administration.

  • Connecting with the right investors, presenting them the correct information, and make it easy for them to make a decision.

If you are going to fundraise (we’ll explore this in more depth in another post), for instance, you need to talk to a lot of VCs. You need a process to run it. Technologies such as Airtable, allow you to create templates, information stores, and processes to streamline fundraising efforts, helping founders track essential bits of information such as:

  • The investor's name.

  • Last point of contact.

  • Status.

  • Contact details.

That way, founders can focus on doing what they do best— pitching their company, making their request, closing the deal, and continuing on. The sample philosophy extends to other business functions too:

  • If you want to manage people performance and strengthen team culture, 15Five is an excellent augmentation tool that can help.

  • If you are hiring people, Checkr handles the necessary background check so you can focus on really getting to know people.

The possibilities are endless. However, it is also crucial that every founder makes every process and recipe their own. As stewards of capital, we can help founders by giving them recipes to start and spend our efforts on delivering them a bespoke human touch to amplify their efforts.

Concluding Remarks

With the strategic application of capital, technology, and a personal touch— I believe we have an excellent opportunity to help up and coming founders express their unique genius commercially, from early pre-seed to massive scale.

The valency (combining power) of human potential, technology, and strategic ventures, is boundless, and I'm excited about how we can further enrich the ecosystem in the foreseeable future!

Arjun Dev Arora

PS A big thanks to Jon Low for his help in crafting this blog post!