This past year, I joined Ground Up Ventures, an early-stage venture capital firm that invests in companies in the US and Israel. Ground Up has invested in game-changing companies like Dandelion (Check out why we invested in Dandelion) and Catch, a YC company which closed its $5.1 million seed-round before Demo Day.
In my role as a Campus Partner, I meet with startups and entrepreneurs based out of the University of Washington and Greater Seattle area in order to source new potential investment opportunities.
I’m not the only Campus Partner at Ground Up — we have an awesome community of Campus Partners in top schools like Harvard both across the USA and in Israel. Ground Up’s team does a ton of work in fostering this community of Campus Partners by providing resources, giving opportunities, answering questions, and more.
Recently David Stark, one of the Founding Partners at the firm, hosted an Ask Me Anything (AMA), where Campus Partners could ask them any and all of the questions we had on startups and venture capital. I’ve written down some of the questions and answers from the AMA below.
Question: All VC firms present themselves as “founder-friendly”. How can a VC or VC firm present themselves as more willing and able to help and support founders?
Ground Up Ventures is a founder-friendly VC firm — but let’s be frank (no pun intended), every single VC firm out there will say that they, unlike the rest of firms, are truly founder-friendly.
The only thing you can do against this is to be authentic to what you claim. Here are some specifics on how Ground Up remains true to their claim of being “founder-friendly”
- We tell founders to “think of us as an extension of your headcount”. If you need help with anything at all, such as raising additional funding or making critical connections, we’ll be there for you. Check out this Design Sprint we’ve recently run.
- Instead of focusing on IRR like most funds, we define our success to be dependent on our Net Promoter Score (NPS) — how likely a founder is to recommend Ground Up Ventures to other founders. In our recent NPS survey, our founders gave us an NPS score of 89, higher than world-class companies like Apple or Amazon.
- We’re more than comfortable with potential founders randomly selecting any of our portfolio companies and speaking with their founders on their experience and interactions with us. We’re that confident in the work we’re doing for our portfolio companies.
Ground Up Ventures doesn’t just talk about being founder-friendly — we execute on it on every opportunity we get and that’s how we present ourselves as more willing and able to help our founders.
Question: As a student interested in going into VC after school, what do you recommend for summer internships: VC experience or startup experience, getting a better understanding of the operations of a startup?
The answer is VC experience for two reasons — in general, if you’re trying to get good at something, practice that thing. Don’t come at it from another angle. If you’re trying to get good at being a VC, practice being a VC.
Secondly, whatever operating experience you’ll get at a startup over the course of the summer is going to be limited, and there isn’t going to be much value placed on that by a hiring VC. Whereas, if a VC sees you have prior VC experience, they are more likely to hire you.
However, if you can’t get a VC role over the summer, then the next best alternative is working at a startup. You should try to find a startup that has just raised a pre-seed or seed round. It will be small enough where you can get some actual work but big enough to actually have some business legitimacy.
Question: What’s your favorite way to source a company?
The two ways to source investment opportunities are outbound and inbound sourcing.
One tactic for outbound sourcing companies is to search for Stealth on LinkedIn. Often times when starting new ventures, founders will list “Founder of Stealth” on their LinkedIn bio. By searching for Stealth, you’ll likely find founders in your 1st, 2nd, or 3rd-degree networks who are working on something innovative and exciting.
A tactic for inbound sourcing companies is to reach out and leverage amazing networkers and connectors in your ecosystem by asking them what companies they’ve met with recently. For example, reach out to other investors in your ecosystem and ask if there are any companies they’ve met with recently that might be a bit early for them or they might have passed on. Encourage inbound deal-flow from your network as much as possible.
Question: How should we think about the way startups choose their investors?
Startups who don’t have choices will just take money- absent other options, they’ll take whatever is offered to them.
Absent any other qualitative differentiator, whichever investor is investing at the highest valuation is what startups will go with.
But once options start popping up for founders, they start to optimize for other factors. Smart founders realize that investor relationships are long-term relationships. They should look for someone they can work with for a long time and someone who can add real value into the business. Some investors are great for recruiting talent, others are great for fundraising, and so on and so forth.
Founders will figure out what they are optimizing for and they then should build a constellation of investors who can provide what they need.
Question: Should we ask founders about current costs/ future foreseeable costs of operating and improving their business, and how much money they plan to raise in order to cover those costs?
Yes — when we look at a financial plan for a startup at seed-stage, we are way more focused on the cost side than the revenue-side because the revenue-side is mostly speculation.
By looking at the cost side, you can figure out the runway the company has based on the amount of funding they are looking for. You want to know the company’s current burn rate and how that burn rate will ramp up over time. As an investor, you need to use this information to figure out how long the amount of funding they are looking for will last them. Based off of that information, you need to think if that is enough time for the company to reach an inflection point, a milestone, that justifies them raising more money at a higher valuation.
Question: If you were to comprise a generic list of five questions to ask founders — what would they be?
There’s a ton of great questions you can ask founders when you first meet them — off the top of our heads, here are five:
- Tell me what you are working on?
- How did you come about solving this problem?
- Where is your business today?
- What is your unfair competitive advantage?
- Where do you see this business headed?
Make sure to ask the second question — it helps you understand if the founders are starting a business to start a business, or if the problem originated from their own personal experiences. It also sheds light on other important aspects of their origin story, like how the founders met each other and decided to start working together.
Questions: How can we kindly say to entrepreneurs “you may or may not hear back from Ground Up”?
Just like it’s important for recruiters to let job interviewers know of the hiring decision regardless of the outcome, it’s important for VC’s to let startups know of the investment decision regardless of the outcome.
Our goal at Ground Up is to make sure every founder hears back from us, whether or not we want to move on in the investment process. As a partner, if it is clear from the meeting that the company is not a fit for your firm, you can let them know on the spot that you don’t think it’s a fit and that closes the book.
If from the meeting, you feel that investment might be possible down the road, end the meeting with some clear action items, such as having the founders send over the pitch deck, etc. Let the founders know when they can expect a response by and stay in contact.
Hopefully, this AMA write-up was as valuable to you as the real thing was to me. If you’re interested in learning more about Ground Up Ventures and what we do, check out us out here! Thank you :)