One of the biggest challenges of building a venture capital firm is putting together a reputation from scratch. When we first started Intelis, I naively believed that building a reputation would be as easy as blogging regularly and pointing people to the values statement we spent weeks crafting. As with everything, it's more about actions than words.
Reputation to Founders
Being in a second or third tier ecosystem is a double-edged sword. Investors have a chance to be a real agent of change by acting in the best interest of a company and its future investors by constructing term sheets and cap tables that preserve the long-term incentive structure for founders to pursue maximum upside.
However, it’s common (often rightfully so) to have to clear additional trust hurdles with founders, as they may be used to dealing with investors less accustomed to partnering with high-growth startups
At Intelis, we strive to be value-added investors. Admittedly, almost all VC's claim to be value added in one form or another so the phrase carries little to no value at this point. To add another layer of complexity to the conversation, not all additional value is equal. Jonathan touched on this subject recently on our blog.
6/ An investor that brings high-quality product advice, and the ability to help you recognize the difference between average and great product hires, often represents a significantly more important category of added value to a founder.
— Jonathan Crowder (@jm_crowd) January 7, 2018
The question then becomes how to prove our team adds beneficial and relevant value to a fast-growing startup even before we invest. We've attempted various ways to solve this problem by creating a pipeline of both talent and customers as well as joining team meetings during the diligence process to ensure both sides feel good about the potential fit.
Reputation to Other Venture Firms
The universal answer to the amount of capital needed to scale a startup rapidly is "more." Given this requirement, we connect as often as possible with Series A investors to learn more about the metrics and processes that make investments attractive to them.We attempt to play a small part in the trajectory of our portfolio companies not only through the value adds discussed above but also by setting up regular board meetings for strategic planning and bi-weekly "standups" for tactical discussions. Setting up these processes early on helps founders become accustomed to the accountability larger institutional investors expect.Warren Buffet once said, "It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently." I'm hoping the processes we're putting in place today help us build a reputation that allows us to work with the founders and investors we admire.