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Humans before hype: This investing method would make VC more inclusive

Investors need to stop investing based purely on a company’s momentum, and instead look for founders with true conviction.

Humans before hype: This investing method would make VC more inclusive
[Source photo: dragana991/iStock; Sharon McCutcheon/Unsplash]
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The question I find myself asking founders the most often is a simple one: “Why are you the right person to solve this problem?” One of the least inspiring (but increasingly common) responses I hear is “I’m really excited for the entrepreneurial journey and I see an opportunity here.” That’s valid. Some incredibly talented people are motivated more by the thrill of the build than by solving a specific problem. And there are plenty of investors who, inspired by their momentum, are eager to get on board. Sometimes I’m one of them. But I also know firsthand that one shouldn’t always trust and follow the hype.

There was a time in the early days of TaskRabbit, the company I founded, when we were doing fewer than a hundred tasks a day, yet getting heaps of national press. Even as Diane Sawyer ran a feature on us, we were assigning jobs to our staff members because we hadn’t yet automated our Tasker onboarding processes. It’s not at all uncommon for a company that’s generating lots of press and social mentions to not yet have the numbers to back up the buzz—and that’s a necessary part of building momentum. But with overhyped companies, it’s often the case that this momentum-building isn’t meaningful to the long-term success of the company. A huge press hit, big name investor, or vanity metric milestone can belie what’s really going on at a startup.

To me, what’s much more interesting than following the hype is discovering the founder who becomes obsessed with solving a specific problem because she has a personal connection to it. Caribu founder Maxeme “Max” Tuchman is a great example of this (full disclosure: Fuel Capital invested in the company’s most recent round). This Miami-based Latina founder, who has a background in education, became obsessed with finding a solution to help traveling parents read bedtime stories with their kids back home. That idea grew into a dedicated video calling app that hundreds of thousands of parents and grandparents now use to engage and connect with their kids and grandkids—a bright spot during a global pandemic. A founder with that kind of passion, focus, and determination is worthy of investors who share her level of conviction.

The difference between momentum-investing and conviction-investing is the difference between getting a piece of a hot company and going all in on someone you really believe in. In practice, investing with conviction means committing to the people you write checks to by leveraging resources, connections, and expertise—it means providing more value than capital can buy. It’s not about writing a hundred checks to a hundred companies and hoping one of them pays off. It’s about knowing you’re the right investor for a particular founder and giving her the support, access, opportunities, and (yes) the capital she needs to go the distance. Do it right, and momentum follows.

So what happens when we start putting humans before the hype and writing more checks based on conviction than on momentum?

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We prioritize founder-market fit

As an industry, tech has gotten a bad rep for trying to revolutionize things we don’t fully understand. The young, white, male Bay Area founder who swoops in to “disrupt” something they have no personal connection to has become a well-worn trope. Why not support the people who do understand these markets, industries, and communities as they go about changing them? I suspect we’d see more successful businesses built for customers who have been long overlooked by venture-backed startups.

People solving problems for those outside of the Silicon Valley echo chamber tend to be closer to those audiences—they understand who they are, how to build for them, and how to speak to them. Just as Tuchman was able to home in on grandparents and traveling parents as underserved customer segments with huge potential, diverse founders offer visibility into diverse markets. Founders with proximity and genuine connections to their users have a distinct advantage over those trying to disrupt from the outside.

We get out of the growth-above-all-else trap

A bias toward momentum encourages investor expectations that are also often at odds with building for the long term. Indeed, rapid growth at any cost has become a mantra and mindset for early-stage companies. We see this clearly in the means and methods employed by young companies hoping to prove their momentum to VCs and other investors, like replacing brand-building with growth-hacking as the singular customer-acquisition strategy.

This “grow, grow, grow” mindset is part of the startup game. But it’s also a trap that leaves young companies focused on near-term growth instead of long-term success.

One of the most prominent recent examples of this is Quibi. Helmed by industry heavyweights and sporting a massive budget, the startup ran so quickly toward growth that it took out a Super Bowl ad before being able to articulate what its product actually does. Quibi’s team moved quickly to invest more than $1 billion on content without a clear understanding of what their customers wanted (or who their customers were). Even experienced founders couldn’t save the company from having the life span of a fruit fly. Conversely, companies with founder-market fit and a commitment to solve a specific problem start with a foundation that can sustain rapid growth. By the time they get momentum, it’s built on top of something real.

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We pave the way toward a more equitable venture ecosystem

Conviction-investing also allows the venture ecosystem to expand its pipeline of worthy founders, leading to more investments in founders serving diverse audiences. Searching for founders with conviction results in a more equitable distribution of venture capital because we’re not spending all of our dollars on the same types of people and ideas. Good, obsession-worthy ideas are absolutely everywhere—and they can solve pressing issues for audiences outside of Silicon Valley’s radar and in sectors that impact all Americans, like education, insurance, and health.

But simply surfacing diverse founders at the seed stage isn’t enough to move the VC ecosystem toward greater equity. The gap between seed and success can be insurmountable, a reality that impacts minority and female founders most. Conviction-investing puts VCs in the position to help close this gap by providing real pathways for people who don’t fit that cliché founder profile. This means knocking down the obstacles between seed stage and a Series A raise by championing founders and hustling right alongside them. This type of commitment results in more diverse founders making it past the gap—and, ultimately, more conviction founders gaining the momentum that makes mid-stage investors want to jump in.

Ultimately, conviction-investing encourages us to prioritize perspective over profile—to reach beyond the image of a “typical” founder (which still leans too heavily toward white, male, engineer) and identify individuals who are building companies inspired by their own life experiences.


Leah Solivan is the founder of TaskRabbit and the general partner at Fuel Capital.