Turning the Page at On Deck
The world looks incredibly different from when I joined On Deck at the end of last year.
In no scenario in my mind did I imagine a belligerent Russian invasion of Ukraine, nor did I anticipate the speed of the resulting economic freefall that closed out the longest bull run in history. Like many other venture funds and startups, we’ve had to adapt with the market inflections that have deeply affected our ecosystem (as very well captured in this recent article from Techcrunch). Most meaningfully, we’ve decided to sunset our accelerator ODX — which will close after this last batch — and we will be pivoting our investment focus towards catalyzing and participating in preseed rounds. It’s been a humbling opportunity to learn just what it means to be an effective investor and fund manager in a downturn cycle.
I’ve been a student of early-stage venture and startups for the better part of a decade. At the end of this week, I’m taking another step on that journey and turning the page on my time as a Partner at On Deck. Some day, I’m going to write a no holds barred business school case study on the awesome and sometimes crazy roller coaster we’ve been on this past year, but today I’m reflecting on what I still believe to be true in the earliest stages of startup investing, celebrating what our team has built to support talented ambitious founders from day zero, and looking forward to where On Deck is headed next.
Building great companies takes a village.
On Deck’s ambition is to meet early stage builders where they are and invite them to be part of a community of founders & operators that can help them take the leap to starting companies. Our venture fund and accelerator funnels belief capital to entrepreneurs who are ready to put their foot on the gas. The On Deck community flywheel is beautiful to see in action — great talent scalably attracts and begets great talent, and at amazing velocity too. That’s how On Deck’s founder community has grown into a real mafia who have gone on to start hundreds of companies now collectively worth $9B+. In many ways, On Deck has perhaps one of the best vantage points in the ecosystem for spotting founders building before product-market fit, and is developing one of the best networks to help them get there.
Exceptional entrepreneurs can truly come from anywhere.
We invested in 150+ companies across 20+ countries and evaluated 12K+ deals. That is a staggering number of startups that the On Deck community attracted at the top of the funnel and a leading indicator of just how much latent entrepreneurial energy exists out there, especially outside of the Silicon Valley bubble. The capacity to unlock startup breakthroughs is not constrained by geography, and it was such a joy to support entrepreneurs from so many different parts of the world. Indeed, I would argue that many of our breakout companies are from emerging markets like Nigeria and India!
Real domain experts matter when going zero to one.
We validated that vertical co-investing REALLY works. As an example, we are fortunate to have partnered with Flexport’s venture fund. Flexport committed to co-investing in every logistics deal that we wanted to move forward on. With more skin in the game, they helped us loop in exceptional partners to advise these portfolio companies, such as Anthony Chen, who was literally the first hire at Flexport and built *everything* there in the early days (we very luckily pulled him out of semi-retirement). With Anthony in place, we attracted higher quality companies and considerably boosted our diligence capability. Every founder who was building in logistics, freight forwarding, and supply chain had something to learn from folks like Anthony. It meant that founders could rely on an operator who had been there and already internalized important lessons that could help them avoid the same mistakes. It was such a success that we had plans to expand this across verticals — you can imagine who we might work with for fintech, crypto, etc.
Network liquidity is table stakes.
Ultimately, founders in the zero to one phase really just want smart capital, insightful advice, and introductions to potential stakeholders that can level up their business (investors, advisors, talent, customers, etc). In my opinion, that last variable can be productized, and the metric I would use to measure success there is network liquidity. This refers to how successful we are at connecting founders to people that are relevant to their needs and asks. The most important dimensions to consider are accuracy (how relevant was an introduction) and speed (how fast did you deliver). At On Deck, we built a lot of great software and engineered serendipity through IRL events that enabled network liquidity. In my mind, this is critical to build for the investors of the future.
The depth of relationship between investor & founder matters.
On Deck earned an NPS higher than Apple and Netflix among our founders! The key driver of satisfaction is the depth of relationship a founder has with their partner or advisor. If you’re not on a midnight texting basis with your founders, I think there’s work to do! On a personal level — and I’m still in a state of shock about this, I asked for the raw data 2X so I could run the analysis myself — I earned a personal Founder NPS of 100 in the latest batch! That metric is certain to come down in the future, but for now it’s an awesome proof point of just how great of an education I received from my mentors — from Josh Kopelman to Mike Maples to Ann Miura-Ko.
There’s no way to rush startup diligence, period.
We set out to make investment decisions within 72 hours of a twenty minute pitch with a founder. In practice, this was a bit unrealistic, at least for me. In contrast, I used to write 50 page memos after weeks of evaluation on every deal we were serious about at Floodgate! At On Deck, I ended up taking 2–3 calls with a founder and at least as many experts calls over the course of a week before feeling ready to pound the table. This is how I know I’m more wired to be a high conviction concentrated investor than a diversified investor.
Less is more when it comes to managing bandwidth.
There is an upper limit to the number of founding teams you can directly work with at any one time. I really stretched myself with 10–15 companies on my plate (in addition to the work around sourcing, diligence, and platform building). If I had to do it over again, I’d want to go super deep on just 3–5 companies — where you can spend at least five hours per week in the foxhole with each founder. Again, this reveals more of my bias towards high conviction investing!
The need for a strong founder community is as salient as ever.
Getting the opportunity to invest at this kind of scale is rare. For me, joining On Deck was one of the most entrepreneurial moves I could have made in the venture capital industry, and I don’t regret it one bit. We took a wild swing, and while the outcome hasn’t been what anyone could have expected, the game isn’t over just yet and we’ve all learned a ton.
On Deck is opening up a new chapter for our venture fund, where we will only focus on making smaller collaborative preseed investments. This is a powerful strategic fit with our On Deck Founders program, a cohort-based virtual bootcamp for founders navigating the ideation stage. If I’ve learned anything this past year, it’s that there is still overwhelming demand from founders for guidance and community in the lonely zero to one journey that every entrepreneur trudges through (even in this bear market environment). For everyone starting a company today, one hundred more are sitting on the sidelines — the world needs more founders.
In the meantime, many of our last batch of accelerator companies are ramping up their seed fundraises as we speak. If you’re an investor and you’re interested in digging in, I invite you to check out our Deal Drop, or get in touch directly for a curated intro!
The On Deck team is exceptional, and I couldn’t have asked for a better group of people to build and invest alongside.
- David Booth and Erik Torenberg are visionaries and I’m beyond confident in their leadership towards building an enduring institution in the startup ecosystem.
- Erika Batista is an incredible operator and gem of a human being, and I’m so happy she’s leading On Deck’s fund into the future.
- Minn Kim deserves a mountain of credit for holding the ship together and getting us here. She is one of the most thoughtful and competent venture investors in the ecosystem.
- Kieran Ryan on our startup evaluation workflows and Nate Snow & Eric Friedman on the back office funding workflows are the architects of our productized infrastructure to invest at scale. We literally could not have done this without them.
- Gautam Shewakramani in India, Fola Olatunji-David in Nigeria, and Yashar Nejati in Canada helped us level up our investing abroad, and their contributions have convinced me that any serious global investing effort at the early stage simply will not work without boots on the ground.
- Sam Kirschner led the way on our accelerator ODX and killed it at executing on a fundraising machine that helped many of our portfolio companies raise their seed rounds.
- Too many more to name — but you know who you are!
