You need to court startup gatekeepers
I spent most of my life imagining startups as meritocracies. They're not.
Welcome to this very first edition of Startup Win! Let’s talk about our relationships with VCs and other startup gatekeepers like accelerators. Some entrepreneurs want to go it alone, and some people cozy right up to them. Which group is right?
Working for “The Man”
Most of my life I’ve been in the anti-”The Man” camp. Goldman Sachs and Microsoft were handing out jobs to graduating seniors at my college and I was having none of it. I was going to join a startup. I believed that my intelligence and drive were the perfect fit for startups which I also believed were meritocracies. Boy was I wrong.
But I held on to this belief for years through many startup experiences. Here’s me referring to the “Silicon Valley Cartel” in 2015:
I had a chip on my shoulder because I thought the VCs weren’t any smarter than me and their opinions on Twitter were often wrong, so why should they get all the fawning media attention?
How did this attitude work out for me? Well, I was never a newly minted startup millionaire like some of my friends who took different approaches. I guess it could be worse. I have an amazing life with my family in Eagle, Colo. and I run a wonderful consulting business that builds software for startups. But upon reflection, even the modest success I’ve had has often relied on the generosity of gatekeepers. While I might have been flipping the bird at the front gates of Silicon Valley, I was building inroads to Silicon Valley-adjacent investors and entrepreneurs.
It’s a hierarchy not a meritocracy
So what about this idea of startups as a meritocracy. Listening to the online cacophony, it’s easy to convince yourself that the most important thing about a startup is CACs and LCVs and product market fit, and that if you have those, nothing else matters.
Here’s someone actively arguing against the importance of big name investors literally with a big name investor:
Pete, with his anonymous Twitter account was not too different than me. But I was even worse. Not only was I not courting the gatekeepers at A16Z, Benchmark, or First Round, I also wasn’t jumping into the open arms of the anti-VC community. The late 2000s and early 2010s were a great time to bootstrap. The biggest name in the bootstrapping world was Jason Fried of 37 Signals. There were others like Rob Walling who founded Drip and Microconf, and then started the TinySeed fund, or smaller local communities like what Brad Feld built in Boulder. I read their books and pressed on alone. I founded a surfboard sharing company, a fishing competition company, and a food safety company with no advice or help from anyone that had ever successfully founded a company. Hmm..
Fortunately, as I was founding these doomed companies, I was a software developer for hire. Through that work I met people, networked, and started to build a track record of success. I named my solo shop Kelsus. Eventually I met some amazing people in Argentina and asked them to join me. We kept working, building software for startups, and stacking up successes.
After a few years, some of our clients had investors that had been funded by some bigger VCs, and we noticed something. Those companies almost never had hard failures. Even when they never achieved product market fit, they’d find their way to acquisitions that built the reputations of their founders. That made me angry. It wasn’t fair! What about meritocracy?!
Getting my invite
Then, on a warm late summer day in New York, feeling small among the towers, I met a titan. I had been invited to participate in a seed round by one of our clients. I can’t name names (yet), but the way this came about is that our client was country club friends with a very famous investor and entrepreneur in the ecommerce space. Even writing that sentence stirs the anti-gatekeeper feelings in me. Their kids went to the same schools, and they found time to talk shop on the sidelines of sporting events. This famous investor peeled off a few million from his bankroll, and my client invited our company to write an angel check alongside.
Based purely on the metrics up to that point, I would have declined, but to be side by side on the cap table next to this important person was too enticing. We did it. We wrote the check. What happened after that was a bit uncomfortable. The famous entrepreneur seeded the company with some folks that he usually works with that he trusted. They had their own way of working that didn’t feel productive to me.
There were times when I thought about writing rage-quit emails. I didn’t like this new direction! Can’t you trust us that we know what needs to happen? That our developers are talented? Maybe these feelings were the same ones that caused me to never look to gatekeepers for support in the first place.
Instead of rage quitting, I talked to a friend and my wife, and cooled off. I took the approach that we all wanted the company to succeed, and we found a way to set aside our differences and keep working—even as the company struggled to produce hockey stick growth.
Two years went by—a pandemic. Still no hockey stick growth. Then, when the bank account was getting dangerously slim, our famous investor made a well-placed phone call. He called the CEO of a public company and said that this little company he invested in had some loyal users that would thrive inside the bigger company. That phone call lead to meetings, a term sheet, a monthlong due diligence, and an acquisition.
Even inside the newly acquiring company, it’s not clear that this product will find product market fit, but there were bigger things at play during that phone call between the public company CEO and the entrepreneurial titan. Those bigger things might involve other deals, future relationships, and other companies, and they are definitely not available to people like the earlier me that insisted on always going-it-alone.
The world of top tier venture backed startups is full of stories like this. The world of go-it-alone, bootstrapped, white knuckle, home equity line of credit startups is full of stories where a few loyal customers remember the the company fondly, but no one else ever heard of it.
Startups are really just like any other industry
There’s another place I learned that respecting the process run by gatekeepers is the surest way to success. For the past two years, I was running a startup called Timber in the podcasting industry. As part of a content marketing push I started a publication and hired 50 freelance journalists to dig up stories about what makes indie podcasters successful. I was looking for something about their personalities or the contents of their shows that typically lead to success. Sadly that’s not what I found.
In case after case, the thing that made the indie podcasters we covered successful was either a) they brought their own audience because they were famous for something unrelated to podcasting or b) they followed the paths laid by the gatekeepers. The gates in the audio world open to people with prestigious journalism degrees, that possibly studied at the expensive and difficult to get into Transom school, and that interned at shows like This American Life and RadioLab. We wrote stories about people like Misha Euceph, Lina Misitsiz, and Juleyka Lantigua-Williams. They all built their careers and audiences through the industry and its gatekeepers not in spite of them.
Maybe the startup industry has matured to me more like the media industry?
Maybe you disagree and you want to bootstrap. If you don’t want money from a top tier seed fund or to go through Y-Combinator, that’s ok. But perhaps you agree that startups are a game of odds, and survival is about maximizing the odds of success and minimizing the odds of failure. So even if you don’t take that big check, having the option to take it is arguably better than not having that option.
How to get your invite
So how to do you pass through the gates of the gatekeepers? How can you get in YC or become friends with GPs at seed funds?
They tell you how. They have events. They have communities. They sponsor startups schools. They tend to really like signals of capability, so while you’re between ideas, you can go do meaningful, visible work at one of their startups. Contributing to a portfolio company is the next best thing to founding one.
What about me? Have I changed my ways? I’m working on it. This post is a public admission that I was wrong. Meanwhile, I’m seeking to become a mentor at TechStars. Kelsus is sponsoring Boulder Startup Week. I’m ready to immerse myself in the community instead of stubbornly forging my own path to irrelevance.
I hope that this was useful for you, and that you’ll find your home in the greater startup community. I invite you to write back. Please feel free to agree or disagree and help me learn.
Also please let someone that could use this lesson know about this newsletter. Thanks and talk to you next week!
Thanks Jon. I interested from your first post.
Great first post! and timely as I am jumping back into the startup game. Would love to read more about alt takes on the investor ecosystem. Any suggestions?