VCs and founders agree: Both should be in it for the long haul

Founders and VC partners discuss the the responsibility of ensuring growth and returning shareholder equity while speaking at Fortune's MPW Next Gen summit in San Diego, Calif. on November 15, 2022.
Stuart Isett for Fortune

For company founders and the venture capitalists who back their businesses, long-term alignment is crucial, a panel of VCs and entrepreneurs stressed at a Fortune conference on Tuesday. The group also shared what they’ve learned from the recent spate of layoffs at startups.

The founder and CEO of Helaina, Laura Katz, described taking about 10 meetings to get to know Sita Chantramonklasri, founder and general partner of Siam Capital, now an investor. “For me, it’s somebody who really cares about the business, somebody that cares about what we’re building and sees that long-term mission,” said Katz, whose New York–based company makes infant formula from human protein. “[And] is aligned on, ‘OK, this is what the next 18 months look like, and here [are] all of the opportunities but here are all of the risks,’ and just being really real and open and honest with each other.”

Chantramonklasri, speaking at the Fortune Most Powerful Women Next Gen Summit in San Diego, likened the founder-investor relationship to a three-step ladder.

The first step: “We need to be almost like a glorified cheerleader,” the New York–based VC said of investors. “The second part of the ladder is really being an active coach, someone who is in the weeds with them.” And the third? Joining the team by playing a role in the business. “If we can keep that North Star of always being on their team, it really in many ways allows us to prioritize and align to be essentially building the company with the founder.”

The panelists were asked if the layoffs now roiling startups—many of which were pushed to hire by investors—offer any lessons for investors and founders.

Jesse Draper, founding partner of Santa Monica, Calif.–based Halogen Ventures, has urged caution since before the pandemic. “We were living in this weird moment of uber-valuations that were literally balloons without revenues to match the size of their business,” recalled Draper, whose firm invests in early-stage, female-founded consumer tech companies. “Even going into COVID, I was like, ‘Why are we growing? Let’s build a really great business with a great foundation. Be profitable—that word we hadn’t heard for so many years.’ So I do feel like now all the founders are listening.”

Having been part of the same herd mentality, perhaps some investors have changed their narrative too, Chantramonklasri argued. “The changing macro environment has also in many ways made investors, who were previously very gung-ho, very bullish, a lot more conservative,” she said. “That’s actually a change in tone that they’ve been expressing to their founders.”

Katz’s takeaway: “You know your business the best. And you need to be doing what’s best for your business, and it’s not always just hiring a ton of people.”

Draper emphasized the importance of seeing upside. “You cannot see the downside as a venture capitalist,” she said.

“Every company has tons of risks, and also unforeseen risks you can’t even imagine,” Draper continued. “At that point, it really comes down to getting to know the founder and knowing that they are open and optimistic. Venture capitalists should be optimistic, and founders have to be insanely optimistic.”

Lisa Reeves, chief product officer of HR solutions provider TriNet, has been a founder as well as an investor. “I never wanted to save bad news to the end, so I was always over-communicating as an early-stage company,” Boulder, Colo.–based Reeves said. “It’s tough, I think, as an entrepreneur as you raise additional capital, kind of navigating those waters, because every investor has a different set of expectations.”

For Chantramonklasri, a strong founder-investor relationship means being “long-term aligned and long-term greedy,” she said.

“Having alignment not just on your values and your priorities, but also the timeline and what your projected workflow or relationship or your expected value is, that actually matters a lot,” Chantramonklasri added. “It’s never perfect with any founder-investor relationship. But once you really have that alignment, it makes a world of difference.”

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