This month, we are five years in the making Contrary. Along the way, we’ve raised hundreds of millions from some of the world’s leading institutions and have been lucky enough to back startups like Ramp, Anduril, and many others.
But like the stories of the startups we back, the journey has taught us a number of lessons the hard way.
I have been reflecting on our history as we reach this milestone and wanted to share a few things I wish I had known five years ago.
Early logos are important
One of the few regrets I have is that we didn’t go logo hunting early. We didn’t go after hot companies that were raising rounds led by big-name firms. Instead, we stuck to our fabric in Fund I, leading rounds on startups and teams we were convinced of and sourced through our own infrastructure. I was under the impression that if we did exactly what we said we would do – lead rounds, back great talent, bring a unique model to market – we would stand out.
Turns out, when you’re building a venture from scratch (limited track record, never worked at a venture before, etc.), logos are important. They are important to potential LPs, who use them as a proxy for access; they are important to your peer group, who use them as an indicator of how smart you are; And they’re important to founders, who will immediately head over to your website and see if you’ve endorsed branded startups.
When starting a venture fund, you should expect to barely have an idea of whether you are competent in the position in 3-4 years.
Fast forward to today. Ironically, our I Fund is one of the best of its vintage year, according to Cambridge Associates benchmark indices. But that action took five years to flourish and made it difficult to raise Fund II. I once had an LP ask me, “Have you invested in any startups I’ve heard of?”
This has long since ceased to be a problem, but I have no doubt that the logo search would have saved us time in the early years.
reputation is critical
In an industry where your reputation and brand are the most important parts of building a business, it’s critical to start from day zero. The first logos are just one piece of the puzzle.
Invest heavily in building meaningful relationships with respected partners, founders, and LPs. Send them relevant, high-quality offers for free; become Twitter friends; go to events; co-invest in companies; and send them a cold email and have a coffee. Do whatever it takes, because relationships are currency in more ways than one.
As an example, one of the main ways LPs will evaluate you and your fund is by aggressively checking references with your existing risk managers. They will ask if Partner X has heard of you, if he has worked with you, and if they would invite him to do deals.
This requires brand recognition at a minimum and ideally includes years of collaboration and producing stellar results. The best way to build your reputation is to send offers to investors that ultimately make you a lot of money.