VC/Firm Fit

A lot has been written about product/market fit, founder/market fit, and different versions thereof. In the months we spent raising our first venture fund, we thought a lot about VC/Firm fit. Notation Capital is an extension of ourselves, so we thought it would be appropriate to share more about who we are, how Notation Capital reflects that, and how we arrived at our focus on pre-seed as well as our approach to working with companies.

TL;DR — We posted the pitch deck we used to raise the fund.

It seems many VCs keep this sort of thing close to the chest, but we figured it says a lot about us, so we might as well share it. The deck outlines some of our previous experience in the NYC startup community, how we can be helpful to the founders we partner with, and why we think we’re well positioned to execute on our specific investment strategy and thesis. The deck does not address our purpose or reasoning behind why we started Notation Capital, so we’ve written a bit more about that below.

Alex and I have been discussing the building blocks of Notation Capital for years. What exists today is the result of hundreds of conversations, a few different core theses, assumptions, and iterations, lots of feedback from founders, quite a few beers, and now a first version. When we say a “first version,” we mean it — our strategy will likely evolve over time as we work with our customers (founders), discover new information, react to changes in the broader market, and learn more about ourselves.

Our skill sets are similar to those of many founding startup teams we work with. Alex is a hacker and engineer, having helped build and scale a number of companies like Path101, bitly, Chartbeat, Digg, among others. He also has invaluable experience building technical teams. He’s been a founder, raised capital, and seen most edge cases that arise in the chaos of building companies. I’ve also founded a couple startups, built products (primarily as a PM), and helped dozens of young companies build teams and product roadmaps, understand customer acquisition funnels, and most everything in-between while running the seed investing business at betaworks.

We’re obsessed with helping the people around us build great things. That’s our purpose, our professional reason for being, plain and simple.

How might we best achieve this mission?

Over the last few years we explored a number of different options, ranging from consulting firm to product studio to investment fund to combinations of all of these. As we weighed different structures, we settled on a few personal opinions that reflect our values and preferences in how we choose to work and spend our days, but of course there’s no right answer.

  • We‘ve never particularly enjoyed building products for clients. There are worse ways to spend your time, but the idea of building things we’re really proud of and then handing them over to others…well…that’s kind of heartbreaking. Also the clients we gravitate towards don’t have much cash (at least in the early days) and if we believe in the company, we value a stake in the product or business far more than their dollars.
  • Building products is part of our DNA and we have a natural bias towards doing so. When learning or thinking about new products and markets, our first impulse is often to start building. We love the idea of both investing and building, but, after giving it careful thought over a few years and recognizing that our resources and attention are relatively scarce, we think we can be most effective by focusing on finding great founders and helping them in every way we can. We believe the best companies are built by unusually driven founders with unique product insights who actually own their companies. We want to amplify their efforts.
  • We like operating at a similar stage to some accelerators, but we want to take a more hands on approach to working with the founders we partner with. We’ve never quite understood the 3-month one-size-fits-all timeline and we’ve never loved the dynamic of demo days or the idea of pitching our company on a stage.

So what’s the best way to leverage our experience to help founders build great companies? As it turns out, there’s a good precedent for that model … it’s called a venture capital firm. We’re not interested in innovating on structure, and, while we may incubate projects in the future, we decided to initially optimize for simplicity and focus on investing time and money in founders that we believe have the potential to build great things.

Our mission is to help technical founders turn their obsessions into valuable products and companies. Why are we focused on this very early stage and on working with small technical teams based here in NYC?

The simple answer is that we think this strategy will produce great returns for our LPs. The more personal answer is that this strategy is the best fit for who we are, what we want to do, and how we want to work.
  • We love to work with companies in their infancy. Not just companies that have already built a core team and have numbers to show, but even earlier…that stage when a founder is thinking about a problem and working nights and weekends to solve it…side-project land so to speak. We ultimately called this stage “pre-seed,” but it has many names these days.
  • We think the best founders are intensely product-focused and usually have technical, design, and/or serious product chops.
  • We believe in NYC and think this is where we might have an edge (having built our careers here). The high-growth companies of this current cycle in NYC — Tumblr, Makerbot, Foursquare, BuzzFeed, Mongo, Etsy, Gilt Groupe, etc. have created a critical mass of talented hackers and designers. We believe many of the great NYC companies in this next wave will be founded by people who grew up in the first wave.
  • We have the most experience and can be most helpful with capital efficient internet companies — marketplaces, AI, mobile networks, API driven businesses, cloud infrastructure, database companies, bitcoin, etc. We don’t have much experience and can’t be as helpful with eCommerce businesses, traditional enterprise sales businesses, hardware heavy companies, etc.

In the years to come, our goal is to prove we’re the best partners for (very) early stage technical founders building capital efficient internet companies here in NYC. If we do that, we’ll have found our VC/Firm fit. Our sense is that with the right thesis and a little luck, our VC/Firm fit will lead to outsized returns for the LPs that backed us (more on that in a later post), and the opportunity for us to continue building Notation Capital for many years to come.