Building seed stage partnership

Roger Ehrenberg
Feb 2 · 3 min read

Since starting IA Ventures more than 10 years ago, I’ve personally questioned my investment identity more than a few times (read: almost all the time). What am I really good at? For whom am I the best partner to build a young company? What are the parts of venture investing that I like the most? While I’ve always been very reflective and self-critical, the intersection of our 10 year anniversary, our announcement of IA Ventures Fund IV and the exciting shift of IA to an equal partnership has only heightened this quest for clarity.

One thing is for sure: I love very early involvement in a company’s development. Starting to work with companies at the seed stage is what I love and where I believe I can be most helpful. Being the lead investor, making a significant financial investment and taking responsibility for being the founders’ partner during these “interesting” times is what I love most about my job.

I am particularly energized by founders who are customer domain experts: the power of having deeply felt a problem and having clarity of vision and purpose for how to best solve the problem is truly intoxicating. There is a richness and texture to the discussions with founders like this that is hard to find among brilliant people who clinically find an interesting problem to solve and go about solving it. Obviously there are those who have had success starting businesses this way, but I have a harder time bridging to customer empathy versus those who have experienced the pain first-hand.

I also have found that I focus on businesses that can enjoy “software economics”, e.g., 70–80%+ gross margins, at scale. Clearly at the seed stage this can’t be observed, but there should be a thesis for why the business can and will look like this and that the seeds are being planted in earliest days. This speaks to founders who have a product orientation, where higher touch sales involving services in early days are specifically engineered away over time as services are converted to software. Make no mistake, this is not easy as customers who are willing to pay but who ask for a lot of custom stuff are hard to turn down, but the product-driven founder with unshakable conviction will do exactly this and focus on customer segments who have the greatest immediate pain, common needs and require less hands-on care.

Our experience at IA has also shown that most seed stage businesses with these characteristics can demonstrate early product/market fit with $3m or less. Capital efficiency is a powerful forcing function during the early go-to-market phase where rapid experimentation towards testing product/market fit is what it’s all about. This also solves for founders who are builders — they love to show-and-tell, can demo a product early and aren’t afraid to collide with the market and sell ahead before a product is finished. How do they do this? By having the willingness and ability to sell the vision, even when the product isn’t perfect. The most successful technical founders can do this, even as coders often get a bad rap for not being sales-y enough.

Founders, angels and pre-seed investors, if you have companies that you think might be interesting to share you can always reach me at roger@iaventures.com. Here’s to making some exciting and transformative businesses together!

Roger Ehrenberg

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