Building for builders
VCs need to meet technical founders where they are.
The way investors target founders isn’t helping them find the type of founders they want to put their money in.
Why VC dinners are cursed
Having attended and hosted numerous VC-sponsored events across several funds in the last two years, I’ve noticed that many of these events can attract the wrong kind of founders: those who are drawn to entrepreneurship for external benefits or clout, instead of being genuinely interested in solving problems. As the event budget increases (fancy dinner, yacht party), so too does the misalignment of incentives for attendees.
Dinners, particularly, can create a disjuncture between branding for people building things and selling things. Those who do shine at a dinner might end up being an investor’s worst nightmare — a founder who sounds cohesive but can’t build their MVP.1 The fancy restaurant is a lure, but it is also communicating about what the firm values – meeting people and socializing, fancy food – as opposed to an event that is focused on building, learning, and discovery. Some people will not participate, or will only participate reluctantly, but others will be excited to participate. Even if VCs perceive dinners as a form of marketing, they are a form of branding.
Dinners might be a good way to lure investors, but they are a less valuable way to represent yourself to founders. How do you build the right branding for founders? Rather than focusing on events, start with how you tell your story. Every VC will have a different set of goals, but this is particularly a problem for those that want to market themselves for technical founders.
Funds that brand themselves for engineers
Despite these challenges, some funds successfully target a technical audience: by developing a strong brand identity. Some firms do it with their name, for instance, Y Combinator and Base Case Capital. Others do it with their websites.
Root VC has a CLI-style website, and Bloomberg Beta hosts their fund website as a Github repo.
It’s the opposite of the VC dinner, which takes technical founder out of their environment and puts them in a different one. Rather than forcing founders into socializing at fancy restaurants, Bloomberg meets technical founders where they are – on Github, where most engineers collaborate on code. When you star a repo (to save or “bookmark” it), your followers see the repo in their feed. This is free advertising in a native environment.
VCs can also build personal brands through blogging in a way that is comprehensible and attractive to founders. A great example is Chris Dixon’s essay, Climbing the Wrong Hill. The essay is about how to find the most significant problems, but he explains his ideas using using a machine learning analogy.
Why it matters: good branding helps funds punch above their weight
Why does branding matter for VCs? At the end of the day, the heart of building successful companies is finding and winning great talent.
Steve Schwarzman writes in What It Takes,
Pete and I thought of the people we wanted to run these new business areas as “10 out of 10s.” We had both been judging talent long enough to know a 10 when we saw one. Eights just do the stuff you tell them. Nines are great at executing and developing good strategies. You can build a winning firm with 9s. But people who are 10s sense problems, design solutions, and take the business in new directions without being told to do so. Tens always make it rain.
Finding the 10s is especially important in an industry like venture capital, where we see power law returns (and the vast majority of startups fail). Without access to top talent, the company with the best ideas would not be able to win.
Great branding allows VCs to win the best talent. Ultimately, founders will work with the investors and funds that make them feel most at home. A fund with good branding for engineers can punch above their weight and win competitive deals at the seed and pre-seed stage.
For this reason, branding is especially important for emerging funds — VCs who are between fund 1 and fund 5-ish — that are trying to solidify their position in the industry and win competitive deals. At these emerging funds, the pain point is often not “picking” startups, but rather, it is improving quality of dealflow (how do you get the best founders to pitch you?) and winning competitive deals (how do you get a talented founder to take your term sheet and not Sequoia’s?).
Great branding also brings free publicity. When Root VC raised their third fund, they were told by news outlets that “funds raising $150M are the new seed-stage startup raising $1.5M (i.e., not interesting.)” However, their website went viral. Lee of Root VC writes,
When we launched Fund III, we added an “upgrading” loading bar that made it appear to install dependencies. That went viral on Twitter several times, not always instigated by us. Any tech press outlet would be jealous of the numbers we posted each time it got big. (via Sar Haribhakti)
Superior branding is part of what has enabled smaller funds like Root and Bloomberg to succeed. Root was a seed investor in Adept, which just raised a $350 million in a Series B funding round co-led by General Catalyst and Spark Capital. Bloomberg was a seed investor in Kaggle, Netlify, Replit, LaunchDarkly.
Practical recommendations
If VCs truly want to attract the founders they want — thinkers who enjoy delving deep, hackers who can build and iterate quickly — they need to refind their own branding and build programming that this very specific audience would enjoy.
To revamp their branding, VCs can make thoughtful choices in how they name their funds, specific investment products, and communities. For instance, if Pear VC were to create a community for builders, one name could be “Pear Programming” - a play on “pair programming.” VCs can also pay more attention to the visuals on their website. Root VC and Neu VC do this well with their CLI-style websites.
In terms of fund programming, it might be better to do puzzle hunts or hackathons instead of dinners, which seems to be what quant firms like Jane Street (Current Puzzle, Estimathon) and Citadel (Correlation One) already do to attract the engineers they want.
For VC, it might be especially powerful to create events that function as spaces where curious people can learn together, by sharing the projects they are building and exchanging ideas. Jad Esber from Koodos has been organizing “hack & tell” events to find engineering talent — with the token for entry being a side project.
Acknowledgments
Thank you to Jacky, Jessica, Miles, Rhythm, Kevin, Chris, and Julian for reading drafts of this post.
banger tweet in the end
as always, you slayed. Literally if VCs read, listened and in acted this they would get so much better dealflow. I'm manifesting for the end of the "wantrapreneur"