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Venture Capital vs. Bootstrapping: Spencer Greene of TSVC On How To Determine If Fundraising Or Bootstrapping Is The Right Choice For Your Startup

In general, a business that’s right for venture is going to be high-risk / high-reward. Venture investors need the potential for very high growth, and an ultimate outcome in the $billions or at least $hundreds of millions. If you’re solving an important problem for a smaller group of customers, then you won’t be a fit for venture.

Founders are often faced with the nagging question of whether Fundraising or Bootstrapping is the best choice for them. What is better, having access to capital or maintaining full control over your vision and profits? What is preferred, to have the seasoned oversight of an experienced investor, or to plow forward with a disruptive and pioneering ‘can do’ attitude? Of course, every situation is different, but what standards can be used to help a founder decide? As a part of this series called “Venture Capital vs. Bootstrapping: How To Determine If Fundraising Or Bootstrapping Is The Right Choice For Your Startup”, I had the pleasure of interviewing Spencer Greene.

Spencer Greene is a General Partner at TSVC, a Silicon Valley-based venture capital firm focused on building and scaling early-stage technology startups. Spencer’s investment focus is on the future of work and digital health. He has led TSVC’s Fund IV investments in Greenlight, Vervoe, Brainome and Angle Health.

Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what brought you to this specific career path?

I spent about 30 years in different types of operating roles in tech companies — product management, engineering, marketing, M&A, and founder of a couple of startups. That experience led to startup advising and angel investing as a side gig. That led to a part-time venture partner situation at TSVC, and from there to full time a few years back.

Can you share a story with us about the most humorous mistake you made when you were first starting? What lesson or takeaway did you learn from that?

Well, it’s not exactly humorous, but I think I was naive mistaking what people should want for what people do want. As in, people should want things that are good for them, like organic vegetables and thoughtful documentaries, but what more people do want is fast food and reality-TV. I started out a bit too idealistic, and what I’ve learned is probably an obvious lesson to others, which is that it’s not enough for a product or service to be good for the customer — the customer also has to really desire it.

You are a successful business leader. Which three character traits do you think were most instrumental to your success? Can you please share a story or example for each?

I try to get at the deep underlying reasons for things — which is both a blessing and a curse.

I had a boss, very successful CEO, and we would often be together when someone would make a presentation, for example looking for a project to be funded. A typical presentation like that might be 20 or 30 slides, and by slide 3 or 4 there might be a statement that was either a factual error, or a logical fallacy, or at least a statement without evidence to support it. I would always stop the presenter at that point and try to get clarification or correction; how could we accept the conclusion on slide 20 if the argument had already gone off track at slide 4? But my boss approached it completely differently. He never said anything until the very end of the presentation, and at that point he often ignored the errors. We had a conversation about it at one point. As I suspected, he saw the same errors I did, but what he told me was that often the (mistaken) logic the presenter asserted on slide 4 was also irrelevant to the conclusion.

Now for me, I had difficulty accepting the mistake. First, I didn’t have my CEO’s wisdom that it might not be relevant. But even if it didn’t matter to the decision being made, I was fearful that over the longer term the “irrelevant” mistake might be used improperly to justify some other decision.

There are definitely situations where my very-long-view approach helps. But in many cases my CEO’s more expedient approach is more appropriate. For me, I’ve had to learn when to use which approach. And more generally, my advice to others would be to understand your own style and inclinations, and get yourself into a role that fits. For me, venture capital is a good fit for my long-view perspective, because what we do as early-stage investors is measured over the 5- to 10-year horizon. The entrepreneurs make all the day-to-day decisions, and the things that an investor or board member gets involved in need to be long-term oriented.

Are you able to identify a “tipping point” in your career when you started to see success? Did you start doing anything different? Are there takeaways or lessons that others can learn from that?

When I was in my early 20s, I worked for a company that went public, and I stood to make some money. But the founders were crooks and cheated me and a number of my coworkers out of a sizable portion of what we were owed.

What we had left to vest was still worth something, and after weeks of very intense and emotional arguing, several of my coworkers decided to stay on for that reason. One sued, and it consumed three years of his life. As for me — I quit, walking away from the remaining vesting. My reasoning was: it’s going to take a while to have another success like this, so, the sooner I get started, the sooner the next success will come. And that’s just about exactly how it worked out — I co-founded a company, went several years without salary, and ultimately sold it for a lot more than the amount I had been cheated out of.

Though it worked out in the end, it was a tough experience to have as a young engineer in SIlicon Valley. I was quite disillusioned for a long time after that. Fortunately I’ve not encountered outright fraud again through the rest of my career — I think that’s probably because it’s not terribly prevalent, but it’s also certainly true that I’m very sensitive to that sort of risk and I stay away from situations that appear even a little shady.

None of us are able to achieve success without some help along the way. Is there a particular person or mentor to whom you are grateful who helped get you to where you are? Can you share a story about that?

Sid Agrawal, who was my boss and mentor early in my career. He taught me so many things; the most important was to use positive language. For example, replace “if we don’t do X we will fail” with “if we do Y we will succeed.” He spent a year correcting me — every time I used the word “no” or “not” or “won’t”, he had me rephrase it, which is a habit of mind that finally stuck with me and that has made an enormous difference for me.

You have been blessed with great success in a career path that many have attempted, but eventually gave up on. Do you have any words of advice for others who may want to embark on this career path but are afraid of the prospect of failure?

I answer many questions with “there’s a book.” In this case the book is StrengthsFinder (and the other Marcus Buckingham books that develop its ideas in more detail). His observation is that some aspects of “you” can be learned (“skills”) and others are more inherent (“talents”). My paraphrase of his whole philosophy is: 1) develop skills that fit with your talents, 2) get yourself into a role that matches your talents, 3) don’t chase areas that are not your talents — complement yourself with people who do have those talents and let them do the things they’re good at.

This thinking runs counter to what many people do, which is that if they’re weak at something they spend a lot of effort trying to shore it up. That can make sense in some situations, but in many cases it’s more valuable to double down on your strengths.

Ok, thank you for that. Let’s now jump to the main part of our discussion. Can you share a story with us about your most successful Angel or VC investment? Or an investment that you are most proud of? What was its lesson?

I made an angel investment a long time ago in Medrio, a clinical-research software company, that’s been growing steadily for the last 15 years with very low capital investment. Two lessons there — first, that the founder(s) matter more than anything else. This is a common trope, so nothing novel here, but certainly reinforced. Second, a good angel deal can look different from a good venture deal. This company has been very capital-efficient, which is a great fit for an angel; these days, companies tend to raise a lot more money, which is a better fit for venture (and less favorable for angel investing).

Can you share a story of an Angel or VC funding failure of yours? What was its lesson?

Most companies fail, and the risk is actually taking the wrong narrow lesson from any given situation. As I like to say, “there’s a book” — check out Annie Duke, How To Decide. She talks about the dangers of “resulting,” which is blaming someone in hindsight for something that could not have been known.

We do a lot of retrospective analysis, and the question is always “what did we know at the time, and what could we have known at the time.” Because we’re predicting the future, the goal is not to be 100% right — that would mean we’re not taking enough risk.

Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?

Well, I had a job offer to join Microsoft in 1988 — does that count? They were already a big company at the time, but still the stock is up 700x since then.

Super. Here is the main question of this interview. Let’s imagine that a young founder comes to you and asks your advice about whether Venture Capital or Bootstrapping is best for them? What would you advise them? Can you kindly share “5 things a founder should look at to determine if fundraising or bootstrapping is the right choice”? If you can, please share a story or example for each.

The answer has changed in the last 5–10 years, because early-stage venture capital is more available. Terms for founders are much more attractive than they used to be — perhaps too attractive; early-stage valuations are at historic highs, and I actually think they’re likely to come down over the next few years. But right now it’s a seller’s market for startup founders, so if you’re starting in 2021 and you have access to venture, you should almost certainly take it.

That said, only a very particular kind of business is suitable for venture capital, and the business you’re starting may not fit that profile. There are lots of great businesses in the world that don’t fit the venture model; one’s not good and the other bad, they’re just different from each other.

In general, a business that’s right for venture is going to be high-risk / high-reward. Venture investors need the potential for very high growth, and an ultimate outcome in the $billions or at least $hundreds of millions. If you’re solving an important problem for a smaller group of customers, then you won’t be a fit for venture.

The high-risk part is not a requirement, but in practice it ends up being an attribute of venture investments, because the “invisible hand” means that the low-risk / high-reward opportunities have already been captured.

The thing you shouldn’t worry about in considering venture vs other capital sources is dilution. Obviously you want to negotiate a fair deal with your investors, but what you don’t want to do is avoid taking investment just to preserve your percentage ownership. Particularly now, when capital is abundant and available to startups on attractive terms, if you have a venture-profile business, then it’s an absolute certainty your competitors will take advantage of cheap funding, and if you don’t then you’re at a competitive disadvantage.

You should be careful to work with the right investors though. Your investor doesn’t necessarily have to be your friend, but it should be someone who will be clear-eyed and helpful to your business.

You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)

It’s hard to say “most amount of good,” because how does one compare? But I’d love to see a solution for online misinformation / disinformation.

We are very blessed that a lot of amazing founders and social impact organizations read this column. Is there a person in the world with whom you’d like to have a private breakfast or lunch, and why? He or she might just see this. :-)

So many! But it would have to be worth their time, and I don’t know that it would be.
Like, I’d love to have lunch with Barack Obama… but what’s in it for him?

How can our readers further follow your work online?

On LinkedIn at https://www.linkedin.com/in/spencergreene — I do post on the TSVC blog and elsewhere, but anything I’m saying will also be shared on LinkedIn, so that’s the best.

Thank you so much for this. This was very inspirational, and we wish you only continued success and good health!

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In-depth Interviews with Authorities in Business, Pop Culture, Wellness, Social Impact, and Tech. We use interviews to draw out stories that are both empowering and actionable.

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