How to Pick a Startup – My Lessons from VC
Sep 17, 2018
Kimberly, Jaleh, and I at our first NakedPoppy focus group.
A few of my friends were surprised to learn that I was working at a clean beauty company. Let’s just say I’m definitely not a makeup person. When I wear jeans instead of my usual athleisure to class I get the comment, “What’s the occasion?” And it’s true – I wouldn’t have pictured myself working at a beauty brand either.
I was drawn to NakedPoppy in part due to lessons I learned from the other side of the table.
After an early career in start-ups I’ve spent the last year working at two seed VC firms – as a Venture Fellow at Pear VC and Summer Associate with Kindred Capital.
These experiences have taught me a lot about what to look for in a start-up, both as an investor and employee. Here are a few lessons I learned along the way that led me to choose NakedPoppy.
- Know what you don’t know.
Before working in VC I had this picture in my head of the polished, perfect pitch. A cool, calm, and collected founder with an expertly curated deck. An articulate answer primed and waiting to every question.
Working at a top seed fund shattered that illusion. It was less shark tank, more startup garage. The best founders were inquisitive, good listeners, and self-aware. The best meetings were conversations that turned into working sessions, that went in directions that neither the entrepreneur nor the investor could have predicted. I was surprised at how few decks were even opened in meetings.
In fact I noticed that one of the fastest ways to turn off a VC was the bravado of acting like you had all the answers. Good investors want talented founders that are aware of their weaknesses and are actively taking steps to address them.
Don’t pretend you’re a marketing genius if you aren’t. If you don’t know the answer to a question, acknowledge it and promise to follow up – don’t just fill air space.
One of the things I admire about our CEO Jaleh is that she knows her strengths and has surrounded herself with people that have skill sets that complement hers. Kimberly is the product-focused analytical powerhouse to her thoughtful, focused approach to brand and marketing. Jaleh trusts herself, but actively seeks advice from subject matter experts. When she gets critical feedback you can see the wheels spinning. She’s actively listening and turning it over in her mind, rather than brushing it off. That’s a good quality. Look for that.
- You can’t fake authenticity.
Yes, this one sounds cliché, but everybody walks in with an origin story. Sometimes that can be incredibly powerful (this chronic illness led me to want to improve women’s health), and sometimes it’s obviously manufactured (I saw my dog’s boredom and just needed the world to have another subscription box of pet toys).
At business school I see a lot very bright people looking to exploit a timely market opportunity. There are certainly many successful companies that have started this way. However, the investors I worked for looked for the passion-driven, I-can’t-sleep-at-night-unless-I-build-this founders.
These are the people who aren’t going to give up when the going gets tough (and it will get tough). Plus, they’ll have such an advantage in telling an authentic story and attracting great talent and capital.
Jaleh and Kimberly will be the first to tell you that they were NOT looking to be entrepreneurs. When talking to Jaleh about why she started the company I remember her saying, “I just can’t stop thinking about it. I know this company has to exist. And that I can do it better than anyone else.”
Jaleh was one of the first “clean makeup” converts. I love picturing her scouring the makeup aisle at Whole Foods (yes, there’s a makeup aisle at Whole Foods) more than a decade ago, buying crunchy granola products because no luxe, clean products existed.
Yes, clean beauty is also a growing trend right now. But that’s not the origin story of NakedPoppy. And when shifting consumer preference and a founder’s true passion and competitive advantage intersect? Magic.
- Be generous.
I was surprised to learn how enthusiastically great investors encourage a generous equity pool for employees. You might not think giving away more equity is aligned with an investor’s interests, but time and time again I heard investors actively steer founders towards being more generous with early employees.
Attracting cheap, mediocre people is much more costly in the long run than finding more expensive, A+ talent that will make a lasting impact on your company. If you want to find and retain talented people, they need to feel ownership. Besides being the right thing to do, it’s in the best interest of everyone involved.
We’re a scrappy, resource-constrained start-up; we don’t have an office and we save a buck wherever we can. Jaleh’s wine cellar is our distribution center and the founders pack every single NakedPoppy box personally. But when it comes to our employees, NakedPoppy doesn’t skimp.
Jaleh and Kimberly want everyone that touches NakedPoppy to be invested and motivated to do great work. For this internship I was compensated to make me feel like a part of the team, not a throwaway summer intern. And that’s a quality of a company you can build a career behind.
- Talent acquisition is the best unfair advantage.
Investors are effectively talent brokers. They host talent workshops, recruit talent advisors, and run talent speed dating sessions. And for good reason – when you’re taking a company from 0 to 1, your number one job is building the team that will build the thing.
While hiring great people should be a priority for companies at all stages, I was surprised by how persistent and how critical a need this is for seed stage startups. And whether it’s a powerful origin story, a proven track record, or more intangible qualities, the founders that effortlessly attract great talent have such an advantage.
NakedPoppy’s founders have all three. People follow Jaleh. And she’s earned it, leading marketing at companies like Amazon, Upwork, Open Table, and Eventbrite to funding rounds and exits. People light up when they hear her name, and drop everything to work on her projects.
Things fall out of the sky for us that at other companies I’d have to kill for: top operators clamoring to be advisors, platforms wanting us to try a Beta of their product. Like having a viral product or a fanatic customer base, it’s such an unfair advantage to attract talented people.
But it’s not enough to just attract great talent as a visionary founder. You need a process for vetting, onboarding, and retaining that talent. Whether it’s an investor, an agency, or a dedicated resource when the time is right, you need to find a partner you trust to help you literally build your company.
Until helping to hire a head of talent for one of the portfolio companies I worked with, I didn’t quite understand how critical this role is. This person is so important, and should be regarded that way.
- Work with good people.
While working with lovely people is hopefully on everyone’s list, I walked away from my summer in VC knowing that it was absolutely the top of mine. Life is just so much better when you enjoy the people you work with and can bring your whole self to work.
As Howard Behar, senior executive at Starbucks is famous for saying in It’s Not About the Coffee, “Wear one hat.” It’s exhausting to be a different person at work and at home – so find a company that embraces all of you and creates the environment you want to be in.
In other words, don’t just work with smart and talented people, work with good people. There’s a difference.
A few examples:
Perhaps more important than winning deals, the investors I worked for said “no” quickly and constructively, turning potential detractors into their biggest promoters.
Kindred actively tracks their NPS score with passed investments and genuinely tries to help every founder they meet with, whether or not they invest. You can feel it.
Pear writes one of the most thorough, thoughtful “pass” emails I’ve ever seen, giving detailed insight into their decision making process and constructive feedback. Yes, they do it to build strong relationships in the startup community, but also because that’s just the kind of people they are.
As Jaleh wrote recently in her piece for Entrepreneur, culture is set at the top, good and bad. Your own flaws as a CEO are magnified x100 in a company’s culture, whether you realize it or not.
If the founder is a workaholic, employees model that behavior and it gets ingrained into the fabric of the company. If the founder lives by a code to never be deceitful to the customer and always act in his or her best interest, that gets modelled too.
No one’s perfect, but honesty, flexibility, and self-awareness are non-negotiables for me in a founding team of any company I’m attaching my name to. We certainly don’t have everything figured out, but our small and mighty team has the fundamentals right.
So no, I’m not a makeup person, but the reason I’m here is incredibly deliberate. And I may be new to this game, but I have a good feeling about this one. Look out world, here comes NakedPoppy.