By Joshua Rahn
As we enter 2020, the start of a new decade, it’s time to reflect on what we’ve learned and share what you can expect from Oceans going forward.
Our pre-Oceans experiences taught us that scale requires discipline, teamwork, brutally tough conversations, and the ability to pivot when the data says so. We also knew that we had to practice fiscal responsibility: with each other, with our founders, and with our partners.
“The more I started to get under the hood [at Foursquare], the more I was like, ‘I don’t know if you guys have realized it, but you’re actually sitting on a tremendous amount of gold.’” — Steven Rosenblatt, The New Yorker
Each of us spent the last 20 years building tech in New York City. We opened the first business offices for Apple and Facebook in NYC, built teams and companies from zero revenue and product to billions of dollars, built and sold companies, were part of IPOs, led difficult pivots and restructured businesses, and raised hundreds of millions of dollars from top tier VCs.
We also spent the last decade as angel investors and advisors, often approached by successful founders to have honest discussions about how to help with their most pressing challenges.
However, as of April 2018, we were doing it together as a venture firm with no assurances that founders would respond the same way. So we decided that we’d put our heads down for 18 months, stay purposefully quiet, focus, and optimize our approach to build a scalable operating system to prove our hypothesis.
Proving Our Hypothesis: Test, Learn, Invest, Iterate, Optimize
After years of building companies, acquiring and selling others, and angel investing, we had a pretty clear hypothesis, but we had to put it to work and answer some tough questions:
Whether you’re a first-time or repeat founder, do you actually want more hands-on support than you get today?
This was a resounding, “Yes!” While first-time founders can be more vulnerable and often hesitate to acknowledge areas where they need help, repeat founders usually know the mistakes they’ve made and understand their weaknesses, or can identify the things they are not best equipped to handle or simply avoid as it is not their most optimal use of time.
“We ended up being oversubscribed and were left with the decision of who to include at this stage. Given our institutional anchors, we decided to optimize for those who could help us operationally…and to push the other institutional investors to future rounds. Your focus on customer acquisition, team building, etc. fit our operational needs.” — Andre Hill, Founder Treno
Do NYC-based startups have access to seed stage investors who serve as teams with operating experience — AND deliver impact?
The answer is typically no. The NYC venture scene has grown exponentially, but early stage investors are still predominantly angels and funds run by 1–2 people, who may have limited bandwidth or experience in building scalable tech. Although it’s rare to see five full-time seed investors operating at our stage, we believe that delivering anything less would be a disservice to founders. We’re full-time all the time, living amongst founders in the Lab at WeWork in the West Village.
We know most firms don’t have people with a talent background as partners. Would having a partner involved in our investment process with a talent background be beneficial?
We bet on the founder and team — full stop. The ability to assess talent at the team level and to help us evaluate key personal characteristics about the founder and team has been hugely impactful for us.
How critical is it for founders to be able to have somebody to help drive the hiring process, not just pass around résumés?
Outside of fundraising, the most frequent question we get asked by founders is around hiring and building teams. They don’t just want résumés, they want the best process to hire the right people and to challenge their thinking on the critical roles they need to get to their next key inflection point.
Collectively, we have hired thousands of people in tech across every function and job level, and founders saw the benefits of that right away.
“Without question, the biggest benefit to partnering with a VC like Oceans is the access to Glenn Handler’s brain and Rolodex of engineering candidates. There is no way that I could get access to the level of tech talent that Oceans has at their fingertips, and have the opportunity for the Oceans team to vet the actual candidates and run the process the way it should be run. Within the first 4 months of being partners with Oceans, they helped me hire a data scientist and my first head of engineering.” — Karen Cahn, Founder & CEO iFundWomen
As investors, can we maintain the same level of dialogue with founders that we enjoyed prior to Oceans, where we were engaged in the hard discussions?
Founders talk about how different we are in our approach — from the questions asked to what is focused on and valued — which is what we aimed for when we started this journey. We know exactly what founders are going through because we have been through it. We know what questions to ask and how to ask them so that we can have the real and trusted conversations. We can do it together.
Scaling Requires Discipline
For Oceans to deliver the required returns, we knew every founder needed to be viewed through the investor lens. We met with hundreds of companies while in stealth mode.
Time was our most precious asset, so we built multiple systems to enable us to move swiftly and efficiently, and to minimize adverse selection not just for us but for the founders who told us they needed speed and transparency from their investment community.
We always knew we wanted to be investors, though we also knew we wanted to follow our passion of directly supporting founders, and put our collective 100 years of experience building companies to work with — and for — our founder partners. At launch we were torn: invest or advise first? We focused on mentoring founders to build trust and feedback before investing. However, founders were concerned of negative signaling if we didn’t ultimately invest.
We decided that if we were going to work with a company, we needed to invest capital at the beginning of the relationship. This pivot ensured that our mission to be the founder’s most trusted partner would kick off with no doubts about our commitments. This would also limit selection bias to ensure we were spending time with companies that we believed could deliver significant returns.
We also looked at Seed through Series B Stage, and learned that if we were going to be most impactful and drive the highest returns, we would need to focus on all Seed and Pre-Series A. We further honed in on putting our time and energy strictly into seed stage companies, and were comfortable working with founders who were pre-product and team. Focusing on seed stage companies would enable us to work at the foundational level in order to have the greatest impact, and allow our model to scale. This was the space where we had our greatest successes in the past, so it was the place we needed to focus.
Management API — The Power of the Team
Every successful company we ever worked with built a world class leadership team. Building a team at the seed level is both challenging and expensive — not to mention highly intimidating, albeit incredibly valuable. Founders wanted and needed cross-functional hands-on support from a trusted partner. This is not easy for founders: even the best and repeat founders want control, and letting go can be hard.
Our team approach gave founders a desperately needed and more efficient approach to mentorship — because 1:1 advisory is hard on everyone! Advisors end up working outside of their area of focus, and founders can’t afford to be slowed down keeping a suite of advisors up to speed. Our bet was working! After every meeting, we received feedback that having a heterogeneous team with our diversified backgrounds delivered significant returns and was valuable on their cap table.
Find your believers, balance what you hear with your conviction — then go and be great!
Like all founders, we met with countless partners and venture capital peers, discussing our vision of being a new kind of venture capital firm: a team of early-stage investors and mentors focused on giving startups the hands-on support they need to succeed. We view feedback as a gift, and we are grateful for the large amount we received. We’re incredibly excited about the validation of what’s needed today to better support Founders and their partners.
Our journey to date has been incredibly rewarding and we look forward to the next 18 months and beyond. We’d love to hear your feedback as well, so please join us in our adventure: Linkedin, Instagram, Facebook, Twitter.