I live for that moment of flicker in an entrepreneur’s eye during a pitch discussion. The one which suggests I’ve asked a question which is simultaneously both new to their fundraising experiences AND interesting to them personally. “What do you want from me besides capital?” is flicker-producing more often than it should be. Maybe it’s because raising money itself can be such a trudge or many investors over-promise and underdeliver, that you’d be happy to *just* get capital and be done with it. But Homebrew is founded upon the belief that we’ll put sweat and reputation behind your startup, not just a wire transfer, so to me it seems like a normal question to help understand if you need things that we can, or can’t, provide.
The answers I receive typically fall across four categories:
1. “Vertical Expertise” – More hands and minds around the industry maze they’re traversing. Information, relationships, pattern matching for marketplaces, SaaS, financial services, agriculture, media, etc etc – our backgrounds and/or portfolio suggest that we might have ability to help the founders move faster and with greater accuracy in testing their market hypotheses.
2. “Horizontal Expertise” – We see lots of startups, we’ve built and run large teams. Founders articulate a certain support they’d like in figuring out operational decisions and growth challenges. Hiring, org structure, product development philosophies and so on. Most of time (~80%) this is about best practices or building a toolbox so you can apply the right tool to the right task. 20% of the time it’s about discarding the best practice to do something unique or irregular because it’s what best fits your strategy, capabilities and culture.
3. “Personal Support” – In what I hope is a mutually self-selecting outcome, we hear from founders who emphasize wanting investors they trust and feel like they can have real conversations with. Who support them as people and their growth. Who will hold the accountable to building something they’re proud of but remember we sit on the cap table, not the org chart.
4. “Venture Industry Advocacy” – Ears to the market, help with the next fundraise, assist with optimizing the rest of the cap table – before and after closing, generally the “be a translator and facilitator between us and the capital markets.” Not an outsourcing of the responsibility, but sort of a “you’re one of them, but on our side.”
In reality, across a multiyear relationship with a portfolio company we end up doing all four of these, but it’s important to start off understanding expectations. FWIW, I’m not looking for wrong answers per se, but there are probably two major red flags for me. The first would be a “nothing” shoulder shrug. We’re not the right investors if all you want is capital and the occasional “great job!” via email. The second would be asks that, off the bat, suggest a CEO is trying to get an investor to solve problems that the founders really need to own, or looking for validation in way that translates as “I’m not sure this company is a good idea so I’m raising money as a process to see if some VCs will tell me it’s a good idea.” Otherwise I truly am just interested in your answer as mutual pre-qualification, not grading it.
By the way, if you’re fundraising and your potential investor doesn’t proactively ask this question – or a variation of it – it’s perfectly reasonable – even advised – to say something like, “can I share some of what I hope to turn to our investors for post-fundraise?” or “for us, a fundraise is more than just a wire transfer, it’s a relationship and here are some of the things I’d like to make sure we’re both excited about doing together.” You’ll all be better for this discussion!