The investor-founder relationship shouldn’t be all top-down. Osage Venture Partners principal Emily Foote, knows this: She previously exited from her startup Practice, entered the venture capital world to join the venture firm this past spring.
Almost six months into her tenure as principal, the former schoolteacher pulled from her experience on both sides of the deal table to share her insights on founders, power dynamics and collaboration with Technical.ly CEO Christopher Wink during an interview for our investor education podcast, Off The Sidelines.
Here are some key takeaways from their conversation:
Founders can soften the edge of power dynamics by learning from peers.
When Foote became an entrepreneur in 2011, she did not have a finance background. A former teacher, she taught for five years in Atlanta, Southeast Washington D.C. and North Philadelphia before practicing special education law.
“There was information out there but not as much as there is today, in terms of educating entrepreneurs so that that power dynamic is shortened or not as acute,” she said. “But I knew how to surround myself with people who did have that business-building experience. Before we did our Series A, we merged with a company in San Francisco founded by Paul Friedman, who had multiple experiences with starting and selling companies. That helped from the perspective of lessening that power dynamic.”
Think long term and look for “business builders.”
On the investor side, Foote believes that looking for people who have the capacity to build out businesses is important. “Business builders,” as she called them, given their previous experiences in entrepreneurship, are skilled at starting firms and weathering the storms that come with the process.
“They’ve lived through the battles of setting a company up before,” she said. “If they don’t have that, we like to look at what their deep expertise is in the industry they’re going into.”
Even if entrepreneurs are starting businesses for the first time, Foote said having experienced people or advisers on their teams can balance out their lack of overall experience in business.
Due diligence is huge when working with first-time founders.
Foote said that due diligence is a key factor in deciding whether or not to invest in first-time founders. That experience has changed even more due to COVID-19 and the restrictions that currently hinder in-person meetings.
“At Osage, the diligence is so deep,” she said. “We’re in the middle of doing diligence with a company where they are first-time founders. Not only do we dive in deep because they’re first-time founders — we do it with all founders — but we also do it because we haven’t met them in person [in the time of COVID-19], which can mean a lot.”
Multiple personal reference calls, customer calls and partner calls are all important points of measure when determining if an individual or team can build a longstanding, successful company. To keep founders on their toes, Foote said meetings will sometimes go off-script to get a feeling for the founders outside of their business plans.
Focus on collaboration, not micromanagement.
When Foote worked on the startup side, she enjoyed her experience. Her company had quarterly board meetings with smart, thoughtful investors and didn’t hear anything from them between those meetings until they were going through an acquisition. But she heard horror stories of founders dealing with investors that micromanaging them ad nauseum instead of collaborating with them. She wanted to do the opposite of that as an investor.
“When I started at Osage, they are incredibly active investors and at first I wondered if we were the investors I heard about,” she said. “But as I’ve gotten more into it, I’m sitting on a few boards now and it’s pretty amazing. At Osage our four partners have monthly board meetings, and meet with CEOs weekly. We have events to bring the COOs together. We have an acceleration plan and it’s more of a guide on the side than a micromanager. Looking back, I wish I had that hands-on approach with our investors because I think it would have accelerated our successes faster.”
Prioritize working with diverse founders.
Foote was a woman cofounder with two cofounders of color and believes that working with diverse founders is essential for investors and VC firms.
“We should look at what kind of numbers of diverse entrepreneurs we’re seeing and keep pushing those numbers up,” she said “You can learn a lot from what business builders and CEOS are doing on that front. Investors need to do the same thing.”
See more from their conversation here:
Michael Butler is a 2020-2022 corps member for Report for America, an initiative of The Groundtruth Project that pairs young journalists with local newsrooms. This position is supported by the Lenfest Institute for Journalism.-30-