On Joining Costanoa and Becoming a VC

Jim Wilson (right), Operating Partner, and Mark Selcow, Partner (left).

After two years working as a Venture Partner at Costanoa Ventures, I am thrilled to announce I am joining the firm as a new General Partner.

I thought about this decision a lot before making a new, significant job commitment. My professional choices were to 1) start another company, after having done that twice before, 2) take a leadership position at an existing software company, 3) become a professional investor and venture capitalist, or find some hybrid model. I spent my Venture Partner years trying the different hats on to decide which of those had the right feeling of risk and excitement.

The question of why #3, VC, was the right answer for me relates to some truths I’ve uncovered about myself. I’m both a creator of structure, and a bit of a rebel and risk seeker. Both are success criteria in being an investor. I’ve teased out that these traits relate to having parents who were both worriers, and counter-intuitively, low structure. No curfew, tons of TV, every Hostess product you can imagine, and very little discipline. I love my parents and appreciate them, but also see how I responded to the environment they created for me by being decisive, and by putting up framing everywhere I go. I needed it. Turns out, that’s a pretty healthy way to grow up relatively fast. The Ring Dings were pretty damn good, too.

I chose option 3, becoming a professional investor in Venture, in large part because I wanted more cycles of these two personal attributes per unit time. I wanted to make strategy decisions (read: investment decisions) more often. In a startup or operating company, if you’re spending too much time on strategy, you have a problem of one kind or another. For example, you’re in a rough market and need to reorient. Strategy should be periodic, while tactics, management and ops are the main month- to- month, quarter to quarter cadence. I wanted more cycles on the new, risky, conceptual side of the ledger where strategy is the main course. And once in, I get to help build and assemble with more variety, provided the founder/CEO is up for the help. VC is ideal for this, and therefore for me at this stage of my career.

So that’s what’s in it for me. But that’s only a sliver of the equation. I also had to think thought hard about if I’d be good at it — good enough to succeed, be valuable to my partners, and good enough to deliver for our investors and portfolio.

My strength as a company leader was the spade work in growing businesses and organizations. I built two companies with Matt Glickman over 17 years, BabyCenter (25x return to our investors) and Merced Systems (22x return to our investors), and learned a ton about the company building process along the way. I have already led three investments at Costanoa (Quizlet, Skedulo, and Springboard), and it’s in these companies where I’ve seen my direct experience as a founder/leader be most useful: Those founders see around a few corners.

But Ops is only the downstream part of the job. Sourcing new investments, is the upstream, critical work to finding the best opportunities. I’ve been through several tech waves and know a lot of people, and have worked hard to maintain my relationships. It turns out, sourcing is relatively easy for me as I’m naturally social, really care about what people are up to, have a middle child’s helper reflex, and have a high coffee tolerance. I’ll rarely say no to another late afternoon macchiato..or two. I stay in touch with my former customers, who work in a wide set of industries, and a range of roles. My former teammates from my own companies have landed in some amazing companies, often in clusters which feels great, and they extend my reach into new sectors. So far, it’s been a joy to activate these networks and feel the momentum.

I had questions about competing for a new investment with other investors, but have found that not to be a major concern. Most entrepreneurs want a board member who has real knowledge and experience, and see a real advantage in having an investor who’s been in their shoes. I have a way to go here, but feel good so far.

At the end of the day, an venture capitalist is assessed by the performance of his or her investment decision making and results. My angel investments (also with Matt Glickman) have gone quite well (over 40% IRR), but I know this is where the rubber hits the road. This is why I spent two years as a Venture Partner at Costanoa, sitting on the investment team meetings, participating in investment decisions, scoring markets, products, teams and deal terms, conducting due diligence efforts studying deal mechanics and tradeoffs to get better at the craft. I don’t think I would have or could have had the confidence that I’d make a strongly positive contribution to Costanoa without that marinating time. It was incredibly valuable, and I’d recommend a Venture or Operating role in a VC firm to assess fit for purpose to my Ops colleagues and friends who are contemplating a move in to venture. I’m sincerely grateful for the opportunity to do that, made possible by the Costanoa team.

It took time for me to make this decision and for Costanoa to be sure about me, but the two years of working closely together gave us both clarity. And the real work is just beginning.

My focus now is to find remarkable entrepreneurs I and Costanoa can work with. I’m focused on vertical industry SaaS at the moment, particularly Financial Services and Education, New Workforce technologies, and on autonomy and robotics businesses. There are a ton of great companies in these sectors.

I’m also spending time working with our Operating team at Costanoa to augment their efforts in support of our portfolio. This is pure joy to me. I get to put energy into supporting Execs in our portfolio as they form options, choice sets, and impose them onto situations when a decision has to be made and framing/structure is required. This is my natural, native state. I think this is really creative work, and it’s essential in early stages of companies.

And I get to do it at Costanoa, where I fit with the firm itself, it’s culture, team and values. Early stage, hands-on investing, with great people of great character.

Now, back to work.

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