The 186 Way: An Authentic Approach to Partnering with Founders
In recent months as we build out the remainder of our Fund I portfolio and prepare for our 2025 Fund II kick off, we have routinely been thinking about how we differentiate within the vast, highly saturated early stage venture ecosystem.
One of the many ways we have worked hard to build our brand to date within various founder communities has been in the approach we take when partnering with founders. As we shuffled to put together portfolio company case studies and other materials for our own fundraise, it has become clear that there seems to be a repeatable “method to our madness” here at 186 Ventures when working with founders.
In an effort to increase visibility for the broader venture ecosystem, with specific regard to founders who are thinking about working with 186 Ventures or who are simply new to getting to know VCs, I lay out some key principles that we take great pride in embracing when getting to know founders.
- Dig deep to serve as a thought partner early on
Founders devote their lives to building their products & businesses. The least we, as VCs, can do is put in the time and respect towards the craft the founder has dedicated themselves to working on as their life mission. Showing up prepared and serving as a thought partner to entrepreneurs who are really the ones laying it on the line has been a hallmark to how we have established rapport with founders. It takes work, but we see it as killing two birds with one stone — we do right by our LPs and conduct effective diligence, and we show founders that we aren’t merely “check writers”, we truly want to be on “the team” with our founders.
In several examples in our current portfolio, including some of the faster growing, more successful portfolio companies, our ability to demonstrate deep industry and subject matter expertise within a specific problem set was a key way we maintained consistent, highly responsive dialogue which ended up making a big difference in why the founder chose 186 Ventures over other VCs to partner with. In the most recent, specific example, we were able to very clearly apply our own prior product & engineering experience to the problem set (AI for product & eng teams) an SF based startup is building. The startup was already backed by one of the most prolific investors in all of SF and had the pick of the litter for their seed round, and our deep dive into being totally aligned on the company product vision made the direct difference in winning an outsized allocation.
2. Give the unpopular advice
Building a company is not all rainbows and butterflies; in fact, it is quite the contrary most of the time. The best founders recognize this and yearn for direct, critical feedback. Although we fully recognize that it is the founder who is putting in the work to build a company and serves as the subject matter expert, we also recognize that we have a responsibility to offer constructive advice to founders, even if it is not what they want to hear. Having been a founder, this was transformational for me along my own journey, and as we guide founders ourselves now, it’s important to keep at top of mind how pivotal this can be to shaping a founder’s mind and perspective when building their business.
This is important in all stages of getting to know the founder, pre and post investment. Some of the most pivotal, important advice we have given founders in our portfolio was not easy feedback to receive. We spend a lot of time understanding whether a founder can be coachable, because we know we can be very direct at times.
3. Lead with founder empathy
On the flip side of giving unpopular advice is making sure we can exercise ample empathy for the founder journey when getting to know them through the diligence process. It’s easy for us VCs to sit back and play judge & jury — after all, we are the ones being pitched for capital. Knowing our place in the ecosystem and understanding that we are not the ones making the magic happen — founders are — is integral to how we approach founder relationship building. There are few things more lonely in life than starting a company, especially during the tough times (which will inevitably come), and viscerally feeling this when interacting with a founder has been paramount to date.
In one specific case, which happens to be inarguably one of the fastest growing companies in our Fund I portfolio, we were the only VC to unequivocally support the founders through a pivot. Even as a former founder, you always hear of VCs who proclaim to be “founder friendly” — but I always tell founders to ask for specific examples of when they were undeniably founder friendly, even in a scenario where they were at odds with the management team. The company in question made a decision to pivot and had very high conviction in the proposed pivot. VCs around the table had wanted the company to return capital without hard evidence that the proposed pivot would fail, completely ignoring the founders’ conviction. In hindsight, this has been one of the best pivots I have ever witnessed in both my founder / operator and VC career to date. Due to this unconditional support, we have been able to build ownership in the company when others have not.
4. Be overly transparent, even if self-detrimental
As much as we like to say we are “founder, operator aligned”, ultimately there are many grey areas where we VCs simply are not aligned with founders. For example, when it comes time to talk terms, it is a clear negotiation. I firmly believe there are ways to accomplish being a good fiduciary to LPs (our investors) all the while being open and authentic with founders who we ultimately negotiate against. One can certainly argue that being too transparent on certain items like ownership targets, minimum check preferences, or how we may desire a round to be constructed can serve as a self-detriment to the VC during negotiations. I think that the best outcomes usually come from laying it all out on the table and helping a founder break things down in a way that looks at it from their perspective, even if it means proposing scenarios in which I, as a VC, do not get the deal I would want in a perfect world. At the end of the day, this wins true rapport and is the right way to approach building a 10+ year partnership with a founder.
Any time term sheet negotiations occur, the founder / VC relationship becomes immediately orthogonal. In at least two examples in the current portfolio, we found ourselves in a very competitive process where the best bet we could make was to be truly founder aligned, even if the advice we were giving on round construction would mean we get less ownership. Afterall, we don’t have it in us to give inauthentic advice to founders– something that has been a hallmark of our brand within the founder community today. In both of these cases, the founders ended up giving us the desired allocation we had asked for, knowing that we had taken allocation from others looking to also enter the round. In my opinion, especially pre-Series A, doing the right thing in the eyes of the founder is always the best decision.
5. Follow through
This is probably the simplest on this list, and yet is far too often dismissed and overlooked. If anything is offered to a founder, follow through. It may seem like a trivial ask sometimes, and may seem like a low priority item to deliver on some ask we committed to from the eyes of a VC, but to the founder it is probably at top of mind. Think about it, a founder is risking it all to make their startup work; it is likely all they think about, day in and day out. One of the best ways to exercise founder empathy and just overall respect is to follow through with whatever you commit to!
There are too many examples to count on how this has served us well at 186 Ventures, especially when it comes to winning deals. Whether it be for a prospective customer, a potential recruit, another co-investor– we always follow through if we make a promise to a founder. There have also been many instances where we have followed through on offered support even if we did not end up investing in the company. Ultimately, we VCs are in the service industry — something we remind ourselves of every day at 186!
