The Importance of Founder/Partner Fit
When there is money everywhere, who you partner with becomes much more important
There has been an influx of capital in the venture world lately, and while this always sounds promising we need to remember that capital alone is not enough to make companies successful. With the power shifting back into the founder's hands entrepreneurs need to look beyond capital and focus more on ‘fit’.
While raising capital is an important aspect in building a startup, given the length of time venture investments last, sometimes upwards of a decade, the relationship between the founder and investor is arguably much more important than the size of investment made.
The three to six months of meeting with hundreds of investors may be exhausting, it pales in comparison to the seven to twelve years founders spend working with the investors that they end up choosing.
One of our portfolio founders stated it nicely:
“When it comes to finding institutional investors, it is important to spend time upfront and find strong partners. Too many founders focus on fundraising and the money aspect of an investment versus the specific partner and the value they can bring.”
Yes it’s the money that starts and binds a relationship between two parties, but it's what happens after the money has been invested when the real relationship starts. That’s why it is so important for founders to focus on the founder/partner fit when considering which investor to work with.
What does a strong founder/partner fit look like?
For Ripple and our founders, it means building a relationship where the founder feels supported through both the good and bad times and feels comfortable in sharing both successes and struggles with the partner.
Tough decisions are inevitable when building a startup and it is imperative that both the founder and partner feel that they can freely express themselves while knowing that they are being supported by a partner who is ultimately a teammate.
Here are questions should you be asking yourself as a founder when evaluating potential partners:
Does this partner demonstrate the same core values and vision that you and your company believe in?
Does this partner have industry experience or hands on experience with the current issues your company is facing (i.e., GTM, Sales, PMF)?
Has this partner invested in similar companies at the same stage, and if so make sure to follow up with the references to verify what the partner can contribute?
One of the most crucial things that you must be confident in when partnering with a VC is that they will stand by your side and be a constant support to you. Doing your due diligence before any partnerships are made will ensure that there are as few surprises as possible.
We believe in this principle deeply. So much so, that prior to offering a term sheet, we require our prospective founders to connect with our existing portfolio companies to validate what we offer and to help maintain total transparency.
Tips for a successful founder / partner relationship
Remember that getting the investment from a venture fund is only the beginning of a long and hopefully successful partnership. In order to set yourself up for successful communication we suggest that you choose a preferred communication channel such as text, Slack, or even bi-weekly calls rather than simply just e-mail.
This structure will force the lines of communication to remain open at all times and will help to develop a strong foundation and transparent relationship. Coming into these meetings with a prepared agenda is always helpful, but don’t be worried about going off-course if the conversation turns that way.
Soon enough, you'll be talking with that partner more than your parents or life partner because you end up trusting them implicitly and want their advice on issues that you previously had to tackle on your own.
It is these relationships that really matter to us at Ripple. When a founder is willing to ask for advice on even the smallest of issues, at the wee hours of the night, we know that we have successfully built a strong founder/partner fit.
The rest will build from there.
Written by Matt Cohen, Managing Partner at Ripple Ventures
Photo by Cytonn Photography on Unsplash