When we first met to discuss starting a fund, one of the things that we all had in common was that we were entrepreneurs. We had launched our own companies, raised funding, gotten rejected by investor after investor, produced good and bad products, and most importantly suffered from failure after failure. We were start up warriors and we had the battle scars to prove it. And we all wanted to do it all over again. We all loved building companies and products. We loved getting our hands dirty. And we loved surrounding ourselves with really smart people.
The first things we agreed on was that if we were going to do this, it had to be all about the entrepreneurs. We wanted to provide an experience for our portfolio of companies that we would have wanted back in the day. It took us a while to formulate that into a strategy, but we did.
If our own experiences had taught us anything, it was that life of an entrepreneur was a tough, lonely, grueling existence. And many times what you needed more than anything was someone to believe in you, someone to bounce ideas with, someone who “could tell you how it is”. And that was the basis of our strategy.
We are an entrepreneur focused venture fund.
What does that mean for us? Well, a couple of things.
First, it means respecting our community. We want to help entrepreneurs and work with them to succeed – whether we invest in their companies or not. But we can’t do that unless they want us to. We’ve been where they are now. And what mattered to us were things like integrity, punctuality, preparedness for a meeting, listening instead of showing off, and being able to actually say ‘not interested’.
Integrity means not meeting companies just to extract information; it means not asking for a second meeting and then saying you’re not interested in their space; it means not asking for a series A deck when you’ve invested in a competitor.
Punctuality shouldn’t just mean showing up for a meeting on time – though honestly, that’s a good start. It should be more that. It should mean dedicating the entire time scheduled and giving it your undivided attention (don’t bring your toys to your meetings). It should also mean not cancelling last minute. Basically, it should mean respecting the time of others.
VC doesn’t mean we know everything about everything. The problem is sometimes we feel like we should and it’ll look bad if we don’t. I’ve been there. No one is an expert in everything. And it’s tough to make reasonable assertions about companies and spaces based on one meeting. It doesn’t take long to do your homework about the company you are meeting, understand the space better, and just know the kinds of questions you should be asking. One of things our partnership agreed on in the beginning was that we would make sure each start up we met would leave our meeting with something fruitful – either a suggestion, a follow-up, an introduction. That’s not possible every time unless you spend some time thinking about them earlier and you actively listen during the meeting. We walk into every meeting knowing we are going to get smarter in some way – what an amazing way to make a living!
Entrepreneurs just want an answer and it doesn’t need to be sugarcoated. We’re not hurting anyone’s feelings. But we are wasting people’s time. Gotta man up! Quick ‘nos’.
Second, once invested, we get as operationally involved in our portfolio companies as our entrepreneurs feel comfortable with, and in whatever way we all agree we should. We help with product, we help with marketing, we help with fund raising, we help paint the walls in new offices. We are not board meeting to board meeting investors. In fact, we would have probably helped put the board meeting deck together!
But it’s tough to be operationally involved and still follow the investing formula for venture capital – invest in 25 companies, expect 18 of them to fail, make your money back in 3-4 of them and make your multiple from 2-3 blockbusters. What we realized was that in order for us to do this effectively, we had to put our money where our mouth was - meaning we couldn’t invest in too many companies. So we threw the formula out the window. Today, we only invest in as many companies as we can support at any given time. For our first fund, that means about 8-10 companies.
Over the course of the 3 years we’ve all been working together, one of the things we’ve all come to realize is that we couldn’t have done it without all of us involved. We wouldn’t have been able to raise our capital, create such high quality deal flow, or be able to provide the support we do to our portfolio. We’re not perfect, and we still are breaking some of the stipulations I’ve mentioned above – but we strive to fulfill each and every one of them and in the process get better at our jobs. This is only the beginning. We have a long way to go. But what’s motivates me is the people we have assembled together. Not sure if it was luck, timing or a blessing, but it’s an honor to work with such an awesome group of professionals, and now friends.
Arranged with witty office banter, and the weekly team lunches, Lightbox truly reflected what they were here for; to support innovation that enriches lives. With a culture that promotes thinking, questioning and collaborating, their space and their people weren’t here only to be the next biggest VC, there was heart behind it.
The advice to entrepreneurs is to experiment, fail, learn and repeat. Try things at a small scale and at a low cost, and quickly assess if they work or not and then take a call on what is worth scaling up. The experiments should either stop or continue based on consumer feedback.