10/07/2021

Tenets of Founder-Friendly Investment Firms

Recently, Elsewhere Partners was named to Inc.’s 2021 Founder-Friendly list as a top founder-friendly venture capital firm. We’re thrilled to be recognized for this aspect of our business, and pride ourselves on the support, guidance, and networking opportunities we provide for our founders.

Many VC firms take a “roulette-style” approach, hoping that just one or two of their companies strike it big while the others may fade away. That can leave a lot of portfolio companies in the dust with an uneven distribution of support, expertise, and attention from the investor.

We don’t believe in that approach.

We aim to support all of our founders with a customized approach that best suits the goals of each individual founder. This distinction is proof that we’re remaining true to that vision.

Below, we outline what we believe to be the most important tenets of a founder-friendly investment firm.

1. Prioritize Alignment

Any founder-friendly investment firm must prioritize alignment with management. It’s important for investors and founders to have a strong working relationship and be on the same page about company goals, growth strategies, and potential exits in the future. Part of that includes alignment on how much capital is right for your business (spoiler alert: bigger is not always better). At Elsewhere, we aim to provide the right amount of capital for your business by accurately modeling what you need to drive sustainable growth and your desired exit. Our goal as an investor is to help you grow on your own terms, and also to help you avoid spending money on things that don’t add true value to your business (see: daily fancy catered lunches).

2. Provide Expertise & a Network

Investment firms must provide more than just money. Any good investor should also offer networking opportunities and practical expertise that will help a founder scale their business to the next level. At Elsewhere, we offer a network of operating advisors (OAs) who help our founders grow their businesses, navigate tough decisions, and plan for the future.

These OAs serve as board members, advisors, and sometimes even full-time executives, depending on the needs of your business and the OAs’ functional expertise. The best part? OAs are available to each and every portfolio company we invest in, not just the few we’ve decided are the winners who can make the fund. That’s because we carefully model the path of every company toward an achievable exit, so our portfolio returns don’t rely on the elusive home runs (more on that below).

3. Open to Outliers

There’s too much groupthink in the world of VC. So many firms go all-in on a billion-or-bust mindset, or won’t touch a software company that isn’t fully cloud-based. But investors that are truly founder-friendly believe opportunities come in all shapes and sizes. We love outliers at Elsewhere. Plenty of our portfolio companies forgo what’s popular to focus on what’s right for their business — like Itential, which opted to host critical infrastructure software on-premise to avoid cloud expenses in the early days of growth. We’re not afraid to go against the grain, and we don’t believe there is a one-size-fits-all strategy for every startup.

4. Location-Agnostic

Speaking of outliers, too many firms also concentrate their investments in so-called “tech hot spots,” when really, great ideas can come from anywhere. Founder-friendly firms don’t believe that bright minds are only located in Silicon Valley. At Elsewhere, we believed this was true long before the rest of the world caught on to remote work. That’s why we invest in companies located anywhere. In fact, our portfolio includes companies based in Texas, Kansas, Nebraska, Israel and beyond. To us, it’s all about your vision, not your mailing address.

5. Open to Various Exits

A common perspective in VC is that companies must shoot for the stars, i.e. a massive strategic acquisition or IPO. The path is arduous, not right for every business or founder, and more often than not, falls short. Firms that are founder-friendly recognize that there are many paths to success. For example, at Elsewhere, we believe the PE landscape can absorb a high volume of exits in the $150 million range. That’s a much different path than the billion-or-bust route and still incredibly meaningful for founders.

In this scenario, these founders can access some initial liquidity, and bring on the right resources to build their company even bigger (or “having a second bite at the apple”). We believe that sometimes majority investments make sense, too, and have helped many founders transition out of a full-time role at their company in order to pursue other passions or retire.

The bottom line: success looks different for every company and for every founder.

If we seem like the kind of investor you’d be interested in partnering with, we’d love to hear from you.