We all want to believe that our work matters — that the 50 or 60 or 100 hours a week we spend away from our families actually makes a difference in our professional community and, if we’re lucky, in the wider world.
As a self-taught venture investor — Andy and I started Founders’ Co-op five years ago, after nearly 20 years as entrepreneur/operators — I’m always testing my assumptions about the role I believe I can play in the innovation community, and the meaning I want that work to make in my own life and the lives of others.
This post is a public unpacking of those assumptions, and an invitation for anyone who cares about these topics to challenge my thinking and make it stronger.
Like many entrepreneurs, we started Founders’ Co-op on a hunch — really a pooled set of observations from our experience as founders in two more-established startup markets (Boston for Andy, SF/Bay Area for me) who had moved to Seattle and together started a venture-backed company here.
Our original thesis was very simple and went something like this:
- Seattle’s a great city with a ton of software engineering talent — mainly because of the massive entrepreneurial successes of Microsoft and Amazon.
- For some reason all that success, money and talent hasn’t translated into a very active or high-performing startup scene.
- It’s kind of a bummer to be an entrepreneur in a city that doesn’t have a strong culture of entrepreneurship.
- We’re here, we like working together and we want to build something cool — maybe we could do some good, *and* make some money — by trying to change that.
- Innovation finance is — and will remain — geographically concentrated.
Sand Hill Road is the Wall Street of Venture Capital, and the leading Series A+ venture firms will continue to produce the best economic outcomes for both founders and early investors.
- But innovation activity is increasingly diffuse.
The collapsing cost of software innovation and globalization of entrepreneurial culture means that elite founding teams will be increasingly be distributed among a growing number of global innovation hubs (e.g, those identified in the Startup Genome ecosystem report).
- Early-stage innovation finance is highly contested within innovation financial hubs…
Incumbent (VC) and insurgent (super-angel / Micro VC) finance players compete aggressively for access to elite founding teams located within the top innovation finance markets: SF/Bay Area and (more recently) New York.
- …but few money-center investors are effective at systematically sourcing quality early-stage deals in secondary innovation markets.
Most traditional money-center firms still expect founders to relocate; those willing to invest outside money-center hubs still struggle with weak sourcing and diligence networks pre-deal, and weak oversight and support systems post-deal.
In the context of these assumptions, the role of a seed fund in a secondary (non-money-center) market is crystal clear:
Does it mean that every early-stage investor outside the money-center markets has to build deep ties to the Valley? Obviously not: a tiny percentage of startups in any market are really a fit for VC; many will go on to build terrific businesses with the help of local angel investors.
But for me and my work at Founders’ Co-op these assumptions create an operating framework that’s both simple and clear
- I am a market-maker, matching world-class founders in secondary markets with the “best” (most effective / most ethical / deepest market understanding) money-center venture investors for their stage and focus.
- My #1 job is to find amazing entrepreneurial talent in markets that are overlooked or under-penetrated by money-center venture investors.
- When I find them, I must do everything in my power — from money and relationship access to hands-on hustle — to prepare them and their companies for success in the next tier of the capital markets.
- To maximize their odds of capital markets success I must also develop trusted “buy side” relationships with as diverse a cross-section of Tier 1 venture investors as possible, so I’m able to make relevant founder/investor matches with speed and accuracy.
If I do these things well, repeatedly, for years and years:
- I will help amazing founders achieve their dreams and make a difference in the world
- I will make money for my investors
- I will make money for myself, my business partner and my family
- I will be able to raise a new — small — fund every few years so I can keep on doing it.
I’m aware that the world is full of urgent needs and I’m not sure my work will do much to meet them, but helping gifted makers make is what I love to do. I’m grateful to have found this work while I still have time and energy to learn a new craft, and I honestly can’t think of anything else I’d rather do.
The world is changing fast and I’m sure I’ll have to revise my plans accordingly, but for the time being you know where to find me — hammering away at creating the best damn secondary market seed fund I can build.
**NOTE — if you want to dig deeper into the accelerating structural changes among tech/innovation funders, investors and entrepreneurs, a few research papers worth reading include:
- “Buy Local? The Geography of Successful and Unsuccessful Venture Capital Expansion” – Harvard Business School
- “We have met the enemy and he is us: Lessons from Twenty Years of the Kauffman Foundation’s Investments in Venture Capital Funds and The Triumph of Hope over Experience” – Marion Ewing Kauffman Foundation; and
- “Seed Investing Report: Startup Orphans and the Series A Crunch” – CB Insights
- “Startup Ecosystem Report 2012” – Startup Genome