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Before you became an investor in BreadI was a startup founder. I know what it’s wish to stand in front of a room filled with people, with sweaty palms, and ask them to imagine in me. I also know how much constant effort it takes to continually prove that their faith – and money – can pay off. These experiences shaped my path from founder to funder, and that is why I approach investing in another way.
As a founder, I benefited most from investors who went beyond providing capital. They mentored me, guided me through difficult decisions and became true partners on my path to entrepreneurship. Now, as an investor, I need to offer the same form of support to the founders I support because it is something that has been missing in the startup world for a very long time.
This transition from founder to funder is not unique – I am seeing an increasing variety of entrepreneurs taking their hard-earned experience and applying it to the enterprise capital sector. Moreover, an increasing variety of former founders are taking on strategic consulting roles for young corporations. These “founders for hire” don’t just provide advice on the side; leverage a long time of entrepreneurial experience to assist today’s founders plan, execute and grow their businesses.
Both founder-investors and founder-for-hire are changing the way startups are funded and nurtured, and I imagine this may have a profound impact on the startup ecosystem in the coming years.
A novel perspective
Successful VC founders invest success rates are 6.5 percentage points higher than skilled VCs. This doesn’t surprise me. Founders-turned-investors bring something that is not common in the VC world: operational expertise. They’ve experienced the ups and downs of startup life, understand the challenges of scaling a business, and have an eye for identifying promising ventures. Investors with startup experience can develop a deeper connection with founders, offering insights that traditional investors may miss.
My co-founders and I built our first product company, Densityfrom scratch, which has shaped my approach to supporting my portfolio corporations. A standard misconception is that business innovation is about technological discoveries, when in fact it is about solving “boring problems.” I look for founders who are as excited about their hiring practices, operational processes and financial planning as they are about developing their products. When you get excited about boring things, you create higher products and run a more sustainable business. I would not have known this without the first-hand experience of trial and error as a founder.
How experiences shape investment strategies
If you are a founder seeking to raise capital, here’s why you wish to look for an investor with startup experience:
- Emphasis on product and market fit: After building the products themselves, the founder and investor is in a position to quickly assess the startup’s potential to unravel real problems.
- Realistic expectations: They understand the challenges of scaling and are often more patient about growth trajectories.
- Focus on the basics: They are likely to favor sustainable business models over hype-driven metrics.
- Empathy for founders: They are more more likely to support passionate founders who display decisiveness and adaptability.
Investors with startup experience offer much greater than just access to capital, often providing founders with access to their network, partnership opportunities and guidance on every a part of the business.
The importance of practical involvement
One of the most vital benefits that a founder-investor brings is the willingness to roll up their sleeves and engage in portfolio corporations. They often need to learn the ins and outs of product development at each company they invest in and the operational challenges they face.
Are they having difficulty hiring the right people? Do they lack clear processes for project deliverables? Are they conflicted about which product feature to prioritize?
Regardless of the challenge, founder-turned-funders aren’t afraid to get into the trenches with their portfolio corporations. I have personally spent many hours helping founders change their visual identity, refine their marketing strategy, and even relaunch their product if needed. In many cases, I’m literally in the code with them.
Investors who have began their very own corporations know how difficult it is. They want to offer emotional support and guidance through the intense ups and downs of startup life. As an advisor to the founders I work with, I hope to make the journey a little less stressful, which may make it easier to realize success.
The way forward for the founder-led startup ecosystem
Just as founder-led enterprise capital firms offer budding entrepreneurs access to operational guidance, working with a consultant who has began his own company can provide invaluable mentoring opportunities.
What distinguishes a founder-for-hire from a traditional consultant is the depth of his commitment. They don’t just help startups refine their sales moves or go-to-market strategies; they actively shape products, help find market fit, and even help build teams. This is a level of commitment that goes far beyond the typical consultant-client relationship. It is also a flexible way for start-ups to leverage many years of experience without having to rent someone full-time or quit too much equity capital.
Having a founder-consultant on your team is one of the smartest things you’ll be able to do as a budding entrepreneur. The combination of practical experience is invaluable in the first stages of business development.
Filling the gap
The rise of founders-turned-investors and entrepreneurial consultants is a game-changer for each enterprise capital and startups. Combining financial knowledge with the real-world experience and hands-on commitment of former founders, these recent players offer young corporations an exceptional level of business development and growth potential.
For recent entrepreneurs, this implies a more supportive and understanding investment landscape. And for the entire startup ecosystem, it means a clearer path to success for everyone involved.