This past week, Springboard helped power an innovation hub called SPROCKIT at the nearly 100K-person National Association of Broadcasters annual conference in Las Vegas. We worked with 27 impressive companies in the production, delivery, management, and distribution of content led by entrepreneurs with a wealth of experience.
Listening to the entrepreneurs talk about their companies, the work they've done, the experiences they've had, the people they've met - it was great reminder of exactly how much I don't know.
Source: jangosteve.com (@jangosteve) via Sean Kim (@sseankim)
My five-year career in the venture world is short by comparison, but I've tried to be a student of every entrepreneur and investor I've met along the way. I know there's a lot I don't know, but one thing I do: not all capital is created equal.
At Springboard, just like an investment firm, we source deals, have a diligence process, and are committed long term to the entrepreneurs that join our portfolio. Being cash-less "smart money" is part of our value proposition.
But what makes smart money smart?
Even though we all know smart money trumps bad money, there isn't a consensus about what makes smart money smart.
Hunter Walk says be a partnership and give honest feedback.
Micah Baldwin shares his list of what makes a good VC.
Boris Wertz says what makes a great VC and how to improve the odds you will find a unicorn.
You can read about how Hunter Walk and Chris Arsenault spend their time.
You can read Mark Suster on why good VCs shouldn't try to be perfect or a profile on why Ben Horowitz is a great investor.
You can even read about what LPs look for in VC.
7 Things I've Learned in 5 Years
I've distilled everything I've read, experienced, observed into 7 things I've learned about being a good investor, to add my own perspective to all the great advice others have shared.
Here they are:
1. Cultivate a power network that you can put to work on demand.
Everything in the startup world hinges on relationships, so maintaining good relationships with well-connected experts across a variety of industries and specialties will allow you to deliver for your portfolio companies when they need it most. Two things that differentiate smart money from dumb money are good advice and connections. And the best investors are the ones that are there for you with both when shit hits the fan.
2. Expand your capacity with data and platforms.
There's only so much time in a day. You can only meet with so many entrepreneurs and field questions and meetings from so many portfolio companies. A new wave of investors are using data and platforms to streamline their processes and source companies. Mattermark, Crunchbase, Angellist, and LinkedIn are all valuable tools. Some, like First Round, 500 Startups and (soon) Springboard Enterprises have community platforms for interconnecting experts in their entrepreneur and advisor networks. The goal is to remove ourselves as the bottleneck to our portfolio companies solving each other's challenges. MightyBell, GroupTie, LaunchSpot and Dashboard.io make it easy for anyone to unlock their networks to better serve their investments. The new challenge will be using technology to enhance direct personal relationships, not to replace real communication.
3. Be willing to be a contrarian.
As an investor, pattern recognition is an important skill. But don't be afraid to go against it. Platforms like Angellist have increased transparency but almost to a fault as it encourages followers and not leaders. The first check is always the hardest. In a world where investors hate "me too investments" they're often guilty of making "me too" investments.
At Springboard we rely on a committee of investors, entrepreneurs and advisors help us evaluate our applications and identify the most promising businesses. Sometimes I disagree, and for better or for worse will lobby for them. I'm not perfect, but I try not to be afraid to go against the popular vote.
4. Use polite persistence.
The best things in life aren't free, and they don't come easily. Whether it's getting someone's attention or growing your network, it can take unwavering persistence over extended periods of time (which in the startup world can be an eternity). Follow up and follow through. Stay "top of mind" with people you are courting a relationship with. Engage them in small ways before asking for a bigger commitment of time or mindshare.
5. Be direct and say why.
Many investors don't say no when they should. Entrepreneurs everywhere are told "we just need to see more traction" because investors don't want to close off a potential investment if it gets hot.
The reality: giving a direct answer respects everyone's time. At Springboard, we give feedback to every applicant we interview and let them know if we think they should apply again next year. One of our entrepreneurs applied three years in a row before they were a fit. But they were persistent and they understood why we said not yet instead of no.
6. It isn't a transaction.
At Springboard, we don't run what some people affectionately call a "pump and dump" accelerator. We cultivate lifelong relationships with our entrepreneurs over not just one but often multiple companies. Springboard alumna-turned-angel investor Lauren Flanagan likes to say we're like Hotel California, you can check out anytime you want but you can never leave. When entrepreneurs get cash (from an investor) or an infusion of human capital (from us) that's when the real work begins.
7. Embrace the karma system.
I like helping people. It's what drives me, day in and day out. In this system, where relationships rule and the timespan is long (for VCs, usually 10 years; for us, a lifetime), doing favors is just good business. I try to give as much as possible without asking for anything in return. I do it because I enjoy it, but in the end it makes me a stronger resource to all the entrepreneurs coming into our pipeline and our portfolio.
I have a lot more to learn. Jumping into the startup world after graduating with an undergraduate degree in Psychology and English means I don't have the financial foundation or operational experience that make for better investors.
But I get people, and that's a start.