“I’m just going to drive off this bridge. My wife can get the policy. My wife and daughter will be okay …”
In the world of venture capital and startups, there’s always an ongoing dialogue of value and power, perceived and real. Because founders and VCs spend all of their time in a human-behavioral cluster where the sole focus is on equity, they often act in ways that are fundamentally broken. I’m writing this today, with the blessing of a brother and friend, to call out some truth that I believe many in our industry need to hear.
My message to VCs reading this: Founders are more than their companies, and truly honoring them is not just something to think about. It’s a requirement of the role you’re privileged to have. My message to founders: You’re more than your companies. It’s that simple. While you likely have poured and will continue to pour your lifeblood into the pursuit of your vision every chance you get, you have been, you are, and you always will be more than the business.
It’s spring of 2016, and Clarence is actually breaking in. This “knock down walls” determined Black man from Decatur, Georgia is doing it. He’s taken what was just an idea and made it into a legitimate, angel-backed, startup company that’s going through Village Capital, a notable accelerator program in Washington, D.C. Not only that, but after meeting with a local VC firm with a $100 million+ fund, he’s now holding a signed and countersigned term sheet for a $4.5 million round. All the promises he made to friends, family, angels, his wife, himself … are about to pay off. Let’s go!
In venture capital I hear many of my colleagues, myself included, talk a lot about empathy. I’ve had limited experience as an operator, but I still question my own ability to truly have empathy for what founders often go through — just to get a shot at their massive, game changing, odds-stacked-against-them dream. Sure, many of us affectionately talk about the months of not taking a salary and maybe trading in a restaurant meal for some cup noodles … but I’m talking about understanding the tough conversations with a husband, partner, or wife … begging for the trust to let you do this stupid thing. I’m talking about not just going without salary, but doing so when you haven’t already “made it” … AND blowing out your savings … AND going into serious debt. I’m talking about never not working, missing out on your kids, your significant other, your health. I’m talking about the emotional exhaustion of finding a ride or die co-founder, and truly, truly being ride or die. I’m talking about accepting money from friends and family who are just betting on you for the sake of you, and knowing that for them the money they’re giving you … it’s not small. I’m talking about with every moment of doubt along the journey having to find the strength, determination, and conviction to not just carry your own emotional well-being, but that of all those who’ve trusted you.
It’s September now, and spring seems like ages ago. That being said, these venture investors are still saying they’re super excited — they just needed to clean some things up. LLC to C-Corp, some new diligence, etc. Also, now they’re saying, although they’re still “ready to rock,” the round is going to be $2.5 million … at a lower valuation … and something about $500,000 in warrants?
Over four months later this feels weak … But, after all the 100-hour weeks strung together, all promises made to the loving but frustrated wife, all the tens of thousands of dollars now in debt to chase this — it’s just one more time biting the bullet.
Anyway, Clarence is still ready to go. He’s holding up his end, and with a new signed and countersigned term sheet in hand he says, “Yo, let’s go win. Let’s do this!”
As a venture capitalist, I sit in a seat of privilege. Like many other partners at firms like mine, I talk to hundreds of startup founders a year that look to me and see someone who can open the door. Who can unlock their dreams. Who can put them in the game, and perhaps coach them or even play alongside them on their path to punching a hole in the universe. Some VCs manage this dynamic well, but many see this dynamic of real or perceived gatekeeping potential, position of power, or “benefit of supply and demand” as an opportunity to be … well … predators.
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I fundamentally believe that this dance that we as VCs and founders do is all about the people. It’s all about the relationships, the trust, the crazy things we can accomplish together when 1+1 = 17, and we figure out together how to make that scale. So often, without trust and people really looking out for each other, that’s just not possible. If you’re an investor and you think “oh, so and so is less sophisticated than me, I bet I can slip in this term that I wouldn’t try with someone else,” please think about that some more. Clarence, like many diverse founders, experienced what is honestly unfortunately common among them (but certainly not exclusive to them). VCs often go straight to ROI math when they think they have something, and rather than think about “how do I honor the person who’s about to trust me with their life’s work by putting something together that’s fair and sets us both up to win,” revert quickly to “how do I extract the most value from this.”
VC is a long-term game.
Can we agree that shouldn’t just be taken into account regarding the path to liquidity?
The phone rings, and Clarence picks up. It’s the person at the firm he’s been working most closely with.
“I know we’re close, but we have a co-investor we want to bring into the deal. Can you be in D.C. tomorrow to meet with them? We’ll get this all closed soon after.”
With the ‘No Shop’ clause that comes with a signed term sheet, Clarence has been kept from talking to any other investors for six months now. Not only does he not have any other investor conversations going, but it would be really hard to explain why the round that was agreed to so long ago might not be happening now. Even though this is … ridiculous … and frustrating … what other choice does he have?
Clarence, based in Minneapolis, thinks on it for a moment, and then does what any good founder would do.
He books a red-eye flight and is there the next day.
Often I think investors look at what founders are willing to do to get things done, and they just lean in. They look at what founders have sacrificed, or are willing to sacrifice, and they just accept it without another thought. As if all the founder had going for them was the company anyway.
That’s never true.
The hour a founder takes for the additional five slides you want done because of how you think a board deck should look doesn’t just come from nowhere. It comes from her kids, from his partner, from her sleep. The flight they’re willing to get on to meet in person or to show up at some networking event doesn’t just come out of the company budget. It comes from their life budget. The dilution they’re willing to take to get a deal done so you can get one more syndicate buddy in isn’t just cap table math. It’s a slice of the heart. Just because founders are willing to do whatever it takes, doesn’t mean it should take the max.
Founders need partners that approach them as stewards, not masters.
It’s now October, and Clarence gets the call he’ll never forget. He closes the door to the bathroom to get some privacy, and sits on the throne as he receives the message.
“… didn’t go well with the co-investor … things are changing … doesn’t seem like we’ll be able to make this work …”
In a state that can only be described as calm shock, Clarence let’s the words of “We’re out” wash over him as he turns over in his head all the people he needs to tell … his employees, his investors, his wife, everyone that’s going to be affected by the fact that there’s no investment coming in, six months after expecting nearly $5 million, and the company will be out of money in 3 months now.
Clarence stumbles through politely saying “okay, I understand …” and hangs up the phone. He tells his wife what happened, he kisses his daughter on the head, and he gets in the car.
Whether you’re a founder or VC reading this, I ask you to think about two words.
Stewardship and Grace.
For venture capitalists, if there’s one thing you could commit to today that I believe will make you a great partner going forward, it’s to look at founders with the intention of being a good steward of not just your resources, but theirs. Care about them enough to honor them with transparency, quick decisions, honest feedback, genuine priority of their well-being, and protection. Protection of what they could give up to pursue their dreams, but don’t need to.
And, have grace. Most founders are not as sophisticated as you on best practices, investment terms, all things “winning the deal.” Have the grace to make space for them not to be perfect negotiators, and still be able to not have to accept the worst possible offer. Honor them, before they “earn it” from you. If you want to ask me how best to be an ally of founders who are Black, Brown, or otherwise diverse, this may honestly be it. While this issue is not unique to them, they are the ones most exposed and at higher rates to this sort of mistreatment and being taken advantage of.
For founders, again, it’s simple: Be a good steward of yourself. Show yourself grace. It may not feel like it in the heat of the furnace, but you are more than your company. No one would have followed you on this crazy journey if it wasn’t true and they didn’t believe it themselves.
Tears in his eyes, pain in his chest, Clarence gets on Interstate 35 E. “I don’t want to be here anymore,” he thinks in his head. He put in so much work … He did everything he was asked to do … He was truthful … He was a good person …
Now his family is $50,000 in debt because of him. Now his friends and family and angel investors who trusted him shouldn’t have. Now his wife, who loves and trusts him maybe did so to a fault, and is going to suffer the consequences. Now his team, who all need to feed their families too, are going to regret ever trusting him with their literal livelihood.
He’s southbound now, barreling down the highway at 130 mph. There’s a bridge coming up, he knows, with a huge drop off.
“I’m just going to drive off this bridge. My wife can get the policy. My wife and daughter will be okay …”
He’s maybe a mile away from the bridge now. He clamps the wheel tighter, turning his Black knuckles white.
“… I’m gonna drive off. It is what it is …”
Then, out of nowhere, Clarence hears a voice.
“Slow down, you’re going to be fine.”
Startled, Clarence keeps going.
“Slow down, I got you.”
Suddenly, Clarence starts feeling the wildest sensation. He feels the gas pedal pushing back against his foot. Against him.
“You’re going to be alright. Just keep going home …”
Clarence pulls the car over and just weeps.
Clarence has always been a man of faith, and in that moment there’s no doubt in his mind that Jesus showed up for him.
God stepped in.
While I don’t expect everyone reading this to be a Christian, I do believe that all of us as VCs or founders consider ourselves to be good people. Whether you believe it to be God’s work, or the mission of good people, I think it’s important to recognize that stewardship and grace are paramount if you’re going to be a positive force in our work.
While it’s tough to draw clear, direct correlation between entrepreneurs and suicide risk, it’s well understood that through characteristics and experiences that founders share (i.e. impulsivity, emotional volatility, social isolation, rejection and failure), suicide is more likely a concern for them than the average person. If you’re a founder (or anyone) reading this and have had thoughts of suicide, please, please don’t go through this alone. Talk to someone you love, visit the National Suicide Prevention Lifeline, and call 1-800-273-8255 to talk to someone who can listen and help. Confidentially. Completely free. That being said, far before suicide is even a question, we can find opportunities to reclaim founders’ abilities to enjoy physical, mental, emotional, and spiritual health.
That day in October, 2016, six months after holding that first signed term sheet, Clarence went home and wept. Today, Clarence wakes up to a life that, as a poor Black kid outside of Atlanta, he didn’t know existed.
He wakes up in a beautiful home, kisses his wife and kids, grabs a coffee, and steps outside to sit on his porch and watch the sunrise. This grinder didn’t quit grinding.
With the support of his wife, and the hard work and fortitude that only exists truly in founders, he has closed $7 million+ in venture funding with a top seed-stage venture capital firms leading his last round.
He hugs and kisses the son that would not have been born if not for him pulling over that day. If not for divine intervention.
With grace, Clarence looks back and forgives those that hurt him so badly in the past. He moves forward, unburdened, with the support of investors who love him. Who steward him. Who show him grace.
As someone who knows Clarence personally, I was truly shocked upon hearing his story today. He’s one of the most dependable, stable, bright-eyed and motivating founders I’ve ever had the pleasure of knowing. It’s for this reason I think it’s even more worth underlining how this grind we call entrepreneurship can get to anybody.
To all the venture capitalists out there, I hope you truly hear this. While we often forget founders are more than their companies, they are. So much more. And while we often find ourselves doing ROI math, it’s not enough. We’re all in a place of privilege in this life, and while we’re all likely to do financially well, I believe there is a right way to do well by our founders. Through stewardship and grace, and through attaching long-term thinking to the people and not just the path to liquidity, we can, should, must honor founders.
And founders …
don’t ever forget.
You are more than your company.
[To read more from Mike Asem and/or to subscribe to his blog, follow this link.]
Mike Asem is a Partner at VC firm M25, which focuses on seed-stage Midwestern startups in most industries, and is a board member of BLCK VC, which connects, engages, empowers, and advances Black venture investors.