A call I had with the CEO of one of our portfolio companies caused me to reflect on some of the similarities between what my partners, Pinhas Buchris, Nir Adler, and I went through in the last year, and the reality that many of the CEOs we meet every day operate and exist in. But first of all I want to share with you that we just finished raising our first fund.
State of Mind Ventures invests in technology companies, initially in an early pre-launch Series A, and then continues to follow on rounds. We focus only on disruptive technologies in the fields of cyber, AI & machine learning, communications, semi-conductors, space, cloud infrastructure etc. We reached our goals and are very happy with the results.
Although both Pinhas and I worked in funds in the past - Pinhas in Apax Partners, and me in Sequoia, we never worked together as a team and are coming from a background of management and business (and espionage and commando raids, but that's just Pinhas...) and not from managing 8 consecutive funds for the last 23 years, so this process, of raising a first-time fund, was a novelty for us. This, as with the beginning of most interesting startup stories, mixed with the typical Israeli entrepreneurial approach, caused us to wildly under-estimate what we undertook upon ourselves.
Raising a new fund, creating a new brand, building the process and methodology, and doing all this while looking at deal flow, making investments and working with the companies. This is not my biography, which i believe will not sell many copies, so i will not share with you every gruelling details of the year long journey we went through, but I do want to share some of the personal aftermath I took away from it. I took 3 main things from this process into my thinking about our relationship with founders:
Be (sometime brutally) honest.
We took 129 first meetings with investors. Family offices from across the globe, institutional investors, fund of funds, high-net worth individuals, bankers, placement agents, lawyers and connectors. I counted. We travelled across the state, and across the globe, met people in luxurious board rooms, offices, coffee places, hotels, weird houses in far-away locations. We had conference calls at 6 in the morning and 11pm at night. We spent hundreds of hours on the phone with lawyers and accountants, and we filled piles of due-diligence questionnaires, prepared presentations and excels, and drafted documents.
During that time, we had a fund to run, with four investments since inception. Through this year long process, in which we worked hard and spent a lot of money we had tons of fun and laughs, but also many tough moments, many crossroads where we had to make hard choices, take calculated risks, and grow as a team. It all sounds too familiar to many of the readers because it is. We did not envision it, but we found our selves setting up a startup, just like any other startup, trying to convince investors to believe in us, and talent come and work with us, and our families that this is worth the effort.
Our startup happened to be a venture capital fund. Meeting a new early-stage tech startup as an investor at 11, and a potential investor for the fund an hour later is good - it makes your remember that we all just operate in one big food chain. We all play our role. We are not special - we just operate the circle of money and technology and people. One day hopefully our portfolio founders will be high net worth individuals. They will not become a different person, just rich. It's humbling, so be humble.
Starting your own company, running around, after many years in the buy-side - moving to raising capital was tough and required personal exposure and courage. Why? Because we all know it's not about companies - i'ts about people. The investor invests in YOU - in your capabilities, in your personality, in your network, in what the investor believes you are capable of doing and achieving, if pushed enough. Nothing is more personal than this, make no mistake.
For us, raising the fund was the same - it was all about us, who we are, what we did and plan to do, and our ability to build an open and transparent relationship with our investor-to-be. An entrepreneur, in general, and especially when approaching a fund is like an artist, or an athlete, or a warrior stepping in front of the audience, saying "Here I Am!". This is how I can change the world, this is why I think I am smarter, more capable, different. Putting herself or himself out there - is personal, is the real deal, it requires courage and a big heart. People with courage and big heart, that put themselves out there are people that I would like to think can inspire us from time to time, and for sure earn our respect and sympathy. So, be sympathetic.
Lastly - what we, the people that raise(d) money have the least, is free time and redundant energy. We are in survival mode, which means that we need to be efficient. What I appreciate the most is transparency and openness. When I worked in Sequoia. Shmil, my partner, used to say that "a fast no is the 2nd best answer after a yes". I think he is very right. If the answer is no, say it. If it is yes, say it, and if it is something else, say it as it is. At the end of this long journey we appreciate the ones that gave us their real opinion, fast, and the ones who told us we are wonderful every time we met. So, if you see that the founders are making what your believe are the wrong moves - say it, say it clear, loud, and offer your help. Be honest.