Our Founders Make the Firm
Recognizing the multiplier effect of startup founders on a VC firm
In March of 2020, during the initial stages of the Covid-19 induced changes in our lives, we made our 51st investment. We’ve come a long way from our first $25,000 investment check in September of 2013. A lot has changed in that time, from the kind of companies we invest in, to being able to say ‘we’ instead of ‘I’. With a team of extremely bright individuals, we’ve pushed our boundaries with every check (technically, wire). Recently, we looked back at that growth and noticed a discernible trend.
The founders we back have proven to be exceptional positive multipliers for us. They are our eyes & ears, directing quality dealflow, assisting with diligence, helping other portfolio companies shorten their learning curves, and at times advocating for Secocha when the founder of a potential investment reaches out to do reference checks on us.
Over the years, we felt that this relationship was one-sided and imbalanced. Once we’ve closed on the investment, we have an economic benefit in their success, but they have no incentive linked to our and each other’s successes. Yet, we see them go out of their way to help us, either directly or indirectly. This relationship needed to be balanced and incentives aligned to live to its true potential; in the founders’ and our best interest.
We looked at what other firms do, and couldn’t find anything that was meaningful enough and doable by a relatively young VC firm like ours. The model of sharing upside with founders who generate deal-flow seemed to resonate with us, in principle. We debated whether it should be directly related to that particular deal/number of deals but quickly shot that down because we felt it rewarded a volume vs. value behavior.
Eventually, we came back to our original observation. Founders have already been helpful regardless of incentive and that led us to build a program that’s more broad based and inclusive.
Secocha Founders Circle is a multi-prong program, but its core is truly unique. It gives each founding team ownership in Secocha thereby participating in the economic benefit of the fund that invested in them. The founders now have a financial incentive in taking an active part in our and, by extension, each other’s success, thereby making it a multi-sided relationship.
More than the specific monetary aspect, this was our way of expressing gratitude for the positive multiplier effect that they have had in the past and encouraging more of the same in the future.
