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July 26, 2022
Written by Golden Section


Reciprocity and trust are the two most important building blocks in any business relationship.

This is no different in venture investing, and even more important in this space as a result of the length of time a founder works with investors until a meaningful exit happens.

Over the last few years embracing these concepts has become mainstream for venture investors, so it is worth exploring what these values mean for both sides of the table.

The days of the “vulture capitalist” may be over, but the marketplace has shifted in the past few months from favoring entrepreneurs to favoring investors. It is because there will be more competition now for money that these values (and actions) will be even more important, and serve as guardrails to make sure both sides feel they are participating in an equitable business relationship.

Trust between a founder and their investor is not a given, and is something that is difficult to achieve. As this Forbes article notes “building mutually beneficial business relationships is more difficult than people think.  It’s not just about whether you can trust someone anymore, it’s whether you can expect the other side to add substantive value.”

But why does trust even matter? Aside from some buzzwords and feel-good slogans, we believe our method of investing is what helps our companies achieve meaningful exits. Founders understand that they are in for the challenge of their lives, but we believe partnering with us makes the journey worthwhile.

When looking at the lifespan of a venture investment, this piece reflects that, “a venture investment or VC relationship is like a marriage, except that divorce is nearly impossible. Make sure you’re marrying someone who can add value to your business over the next 5-10 years—and more importantly, someone you think you’d still want to be in a room with at that point.”

The relationship begins with clear expectations from both sides on what each party brings to the table. You build trust by keeping your word and being consistent, and develop reciprocity by giving… even when sometimes, like in a marriage, you may not get the equal amount in return.

Setting expectations

Everything in life is about managing expectations, and often our frustrations arise from misaligned expectations, or expectations which are not met. There are a number of values/actions we believe make up the behaviors of trust and reciprocity such as grit, empathy, candor, and stewardship.

Those are the traits we look for in entrepreneurs we partner with, and the traits we look to develop in ourselves. They set the foundation for the process of building trust and having an empowering relationship based on reciprocity.

Setting up a framework with transparent benchmarks helps both sides hold each other accountable along this journey.

Some expectations

There are expectations which we expect from the founders we invest our money and time into.  Some of those prosocial behaviors include that they will pay attention in meetings, and engage in meaningful participation in the community.

We ask that when we offer advice the founder works to implement it, and that above all that they understand execution is key. Especially now, with money invested into startups beginning to slow, execution with a focus on capital efficiency is even more vital to a startup’s success.

When founders are open to it, such as our portfolio company Tango, we’re able to work alongside talented founders as they work to grow their company through the many challenges startups face. In Tango’s case, in dealing with how the pandemic negatively impacted the hospitality industry, the founders’ openness to guidance helped them emerge from this crisis stronger and provided them with tools to expand their business.

When entrepreneurs come with an open mind, we’re able to create collaborative relationships which lead to successful outcomes.

And while a good working relationship is important, above all, what is vital is that the founders be kind.

It’s a two-way street

We often wish that entrepreneurs would seek to work with venture investors who share the same values as them… and not just a brand name or an investor who oversells their value proposition. So many headaches could be avoided if both sides’ values were aligned.

Trust is key here. When entrepreneurs are open with us, we’re able to parlay our expertise in helping them solve major problems. An example is how the CEO of one of our companies, QMSC, approached us about what could have been an existential threat to his startup. When QMSC’s biggest customer was not paying, instead of fearing our response and trying to tackle this situation by himself, Cameron came to us, and trusted us enough to help him work through a solution.

It works both ways, we put money into companies where we see growth potential and our values align, and view founders as long-term partners we can trust.

It is a two-way street so there are expectations we need to live up to as well. Founders should expect from us that there is clear communication around meetings, and that we will be 100% present with them during those times. And that we will be honest with our feedback.

Embrace the Suck, And Trust the Process

The journey is long and painful, but entrepreneurship is a form of creative exertion. Entrepreneurs build companies for the same reason that people go through the arbors in pursuit of climbing mountains; in order to self-actualize by bringing value to the world. We want to be along for this journey, and know that trust and reciprocity are key values in making sure that journey to a meaningful exit is possible.

The alternative is, if you choose the wrong partners, ones who you can’t trust, who don’t have your best interests in mind, you may never reach your destination.

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