Second lap around the track

CEO of Bolster, Matt Blumberg, literally wrote the book on being a Startup CEO. In his latest blog he talks about how multi-time founders operate differently to first-time founders. This is based on his work helping startups scale CEO's, Executive Teams and Boards. He's noticed a distinct set of behaviours and desires that make the second time around the track a little easier. Not every multi-time founder has every one of these traits, but they all have a majority of them and they form a common pattern. First, they have a Big Vision. Once you’ve had an exit, whether successful or not or somewhere in between, you don’t want to focus on something niche. Life is too short. They go all-in on a big problem. They are Impatient for Progress, and constantly want to be 6 months ahead of where they are. Similarly, they are Impatient for Success (or Failure) and want to get to “an answer” as soon as possible. "No one likes wasting time, but when you’re on your second or third company, you value your time differently. Succeed or Fail – you want to find out fast."

Second-time founders have an Easier Time Recruiting team members and investors. Founders often attribute this to their improved ability to tell a compelling story of their vision and how they are going to change the world. This creates a strong personal context and sense of mission that candidates want to be part of. They make recruiting an absolute priority right from day one. They also tend to have Much Cleaner Cap Tables, because they lived the horrors of a messy cap table when they exited their last company without thinking about that topic ahead of time. They are driving to be Efficient in Execution and Find Leverage wherever they can. "One multi-time founder I talked to a few weeks ago was bragging to me about how few people he has in his finance team. At Bolster, our objective is to build a big business on a small team, looking for opportunities to use our own network of fractional and project-based team members wherever possible."

They are Calm and Comfortable in Their Own Skin. At this stage in the game, repeat founders are more relaxed. They know their strengths and weaknesses and have no problem bringing in people to shore those things up. They know that if things don’t work out with this one, there’s more to life. There is more of a portfolio mindset and they don't flog themselves to death over lost causes. They are stronger at Self Management. They are more efficient. They exercise more. They sleep more. They spend more time with family and friends. They work fewer hours. None of this guarantees success, but the sum of all experiences creates greater awareness and proactivity. First-time founders will always bring their unbridled enthusiasm for the cause. Second-time founders bring this too, but focus on how this can be more effectively channelled into fewer activities that ultimately really matter.

The power of storytelling

James Clark is a Silicon Valley legend. He was founder of Silicon Graphics (1982) and co-founded Netscape (1995), together with Marc Andreessen. The Netscape browser launched the internet boom of the late 1990’s, making Clark a billionaire following the acquisition by AOL. In 1995 Clark was diagnosed with a rare blood disease, hemochromatosis, which subjected him to the chronic inefficiencies of the US healthcare system. This life-changing experience became the genesis of his most ambitious project, Healtheon. Clark’s vision was to eliminate the paperwork and bureaucracy associated with medical care, an undertaking of enormous scale requiring unprecedented investment. Yet Clark’s investor ‘pitch deck’, described in Michael Lewis’s book, The New New Thing, was no more than a drawing on a whiteboard. The story of how he used this diagram to secure the backing of two VC titans, Kleiner Perkins and New Enterprise Associates, is an exposé of both the VC mindset and the true power of storytelling.

Storytelling as a means of securing audience engagement is now widely recognised. Founders preparing their investor pitches may not have the credentials of James Clark, but they do have access to the same techniques. Yet often in the haste to create the perfect pitch deck, founders lose sight of the fact that it’s the narrative that really counts. The slides are merely a backdrop to support a presenter-focused story. Why? Research has shown that audiences are more likely to engage with and adopt messages that make them feel personally involved by triggering an emotional response. Clark’s compelling narrative, supported by his own personal experience, had VCs lining up to invest. Founders that develop a strong 'origin' story can also draw upon this as an ice-breaker in almost any forum, especially with investors. The most powerful presentations are open and honest. Great exponents don't just talk about their mission, they talk about their journey, their sacrifice, and their failures. They explain what it means to them and, critically, what they have learned. Whether this is an elevator pitch, the text of a cold email approach, a teaser deck, or an Investment Committee presentation, the story is everything.

In Tony Fadell's latest book Build: An Unorthodox Guide to Making Things Worth Making, he describes how he learnt his storytelling skills from one of the masters of the art, Steve Jobs. Fadell led the team that built the iPod and the iPhone. He recounts the famous speech Jobs gave at the iPhone launch in 2007. This is back-of-the-neck hair-tingling stuff to read again - the buildup and surprise, the brilliant setup. As Fadell says of these big moments that Jobs created, "it never felt like a speech. It felt like a conversation. Like a story. And the reason is simple: Steve didn’t just read a script for the presentation. He’d been telling a version of that same story every single day for months and months during development—to us, to his friends, his family. He was constantly working on it, refining it. Every time he’d get a puzzled look or a request for clarification from his unwitting early audience, he’d sand it down, tweak it slightly, until it was perfectly polished." Jobs understood the power of storytelling. He learned the theory then practised the skills until perfect. For founders seeking to unlock the door of investor engagement, this is the key.

CVC investment declines but remains highly valued

As we highlighted in May, Corporate Venture Capital (CVC) has been on the increase in recent years. A recent survey showed that the majority (52%) of CVCs now active only began operating since the beginning of the pandemic in 2020 (2,092 of 4,062 surveyed). According to Pitchbook, CVCs have significantly increased their presence in VC deals with their participation in global rounds rising by 462.5% in the 10 years ending in 2021. But the current downturn has forced many corporates to review strategy. The data suggests that CVCs are retrenching quicker than traditional VC investors but not altogether retreating from the asset class. In Q2 2022, CVCs participated in 2,167 deals worth an aggregate $53.1 billion, a quarter-over-quarter decline of 18.9% and 33% respectively. In comparison, the number of rounds closed featuring just traditional VCs saw a QoQ decline of 10.3% over the same period.

The degree of participation by CVCs in venture deals will almost certainly be tempered by how their parent company's core business performs in the current market. Corporates that had plans to launch new venture arms in recent months seem to be thinking twice. Only 4 new corporate venture arms are on record to have launched so far in 2022, according to PitchBook data, compared with 42 in 2021. But the motivation for corporates to pursue the venture space remains strong: "A well-defined and managed CVC program offers valuable market intelligence to see where an industry is heading and how it can be disrupted. It can also be a powerful way to accelerate a company's digital transformation by giving larger organizations access to new technologies. With depressed valuations and less competition for deals from investors like hedge funds, which have largely fled the market, it can be a buyers' market for CVCs looking to put their capital to work."

In the early days of corporate venturing, founders would be very wary of corporate interest. CVCs were more focused on their parent companies' priorities rather than those of the startup, even including deal terms allowing them to block acquisitions by competitors or IPOs if this didn't align with their interests. That mindset has all long changed. CVCs are now more financial-first in their approach in order to receive solid returns as well as strategic value. Equally, founders have become more discerning in who joins their cap table and CVCs can often be great partners. They can trigger paid-for commercial collaboration deals, bring a strong network of industry connections, contribute technical expertise, as well as deep market insight. Providing there is clear alignment with the startup's core aims, such support can be a real accelerant. This value-add is often much more demonstrable than what traditional VCs can bring. For DeepTech startups in particular, corporate interest can add credibility to the funding proposition. They are often well positioned to lead technical due diligence where other parties may not have the necessary expertise. They can also vouch for the market and imbue confidence amongst other investors that the startup is onto something very special.

Happy reading!