MPW Next-Gen: The alliance between founders and venture capital


For business founders and venture capitalists backing their businesses, long-term alignment is crucial, a panel of VCs and entrepreneurs pointed out during a Fortune conference on Tuesday. The group also shared what it learned from the recent wave of startup layoffs.

Helaina founder and CEO Laura Katz described taking about 10 meetings to get to know Sita Chantramonklasri, founder and general partner of Siam Capital, now an investor. “To me, he’s someone who really cares about the business, someone who cares about what we’re building and sees that mission for the long haul,” said Katz, whose New York-based company York makes infant formula from human protein. “[And] is aligned to, ‘OK, here’s what the next 18 months look like, and here [are] all the opportunities, but here are all the risks,” and being really real and open and honest with each other.

Chantramonklasri, speaking at the Fortune The Next Gen Most Powerful Women Summit in San Diego compared the founder-investor relationship to a three-step ladder.

The first step: “We have to be almost like a glorified cheerleader,” the New York-based VC said of the investors. “The second part of the ladder is really being an active coach, someone who’s in the weeds with them.” And the third? Join the team by playing a role in the company. “If we can keep this North Star from still being part of their team, it really allows us in many ways to prioritize and align to basically build the business with the founder.”

Panelists were asked if the layoffs currently plaguing startups — many of which have been pressured into hiring by investors — offer any lessons for investors and founders.

Jesse Draper, founding partner of Halogen Ventures, based in Santa Monica, Calif., has urged caution since before the pandemic. “We were living in this weird moment of overvaluations that were literally balloons with no revenue to match the size of their business,” recalled Draper, whose company invests in female-founded consumer tech startups. “Even going into COVID, I was like, ‘Why are we growing? Let’s build a really great business with a great foundation. Be profitable, that word we haven’t heard for so many years. So I feel like now all the founders are listening.

Having been part of the same herd mentality, perhaps some investors have changed their narrative as well, argued Chantramonklasri. “The changing macroeconomic environment has also, in many ways, made investors who were previously very enthusiastic, very optimistic, much more conservative,” she said. “It’s actually a change in tone that they expressed to their founders.”

Katz Takeout: “You know your business best. And you have to do what’s best for your business, and it’s not always about hiring a ton of people.

Draper emphasized the importance of seeing upside down. “You can’t see the downsides as a venture capitalist,” she said.

“Every business comes with tons of risk, as well as unforeseen risks that you can’t even imagine,” Draper continued. “At this point, it’s really about knowing the founder and knowing that they’re open and optimistic. Venture capitalists should be optimistic and founders should be incredibly optimistic.

Lisa Reeves, chief product officer of HR solutions provider TriNet, was a founder and investor. “I never wanted to keep the bad news to the end, so I always over-communicated as a start-up,” said Reeves, based in Boulder, Colorado. “It’s difficult, I think, as an entrepreneur to raise additional capital, to sort of navigate those waters, because every investor has a different set of expectations.”

For Chantramonklasri, a strong founder-investor relationship means being “long-term aligned and long-term greedy,” she said.

“Having an alignment not only to your values ​​and priorities, but also to the timeline and your projected workflow or relationship or your expected value, actually matters a lot,” added Chantramonklasri. “It’s never perfect with a founder-investor relationship. But once you really have that alignment, it makes all the difference.

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