How to become a VC without being invited
The secret is that you just do it.
A little programming note: I am going to take a break! Since I am living in Europe, and it is very European to not work at all in August, I’m going to pause the newsletter the entire month. Imagine how well rested I’ll feel when I return. You can still reach me in the usual ways either on Twitter or by email.
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The life advice I gave that I’ll never forget
Sitting across from the tall Norwegian at the Starbucks in Edwards, Colo., I wondered, “Why should I be the one telling you what to do? You’re 20 years older than me.”
This was 10 years ago. The man I was sitting with had spent his entire software career as a freelancer with a single client working on a single project. He had been building some kind of database system for the US Forest Service with Visual Basic, and they had recently decided to shut it down, and he was at a loss.
I was sitting there because a family friend had asked me to help him. Maybe they thought I knew someone that would hire him, or maybe they thought my own, extremely small at the time, software consulting business would hire him. I knew I wouldn’t be able to do either of those things.
The only thing I could offer him was advice. He said he wasn’t getting any interviews when he applied for jobs, so I told him he needs to make himself appear to be the kind of developer that never stops building whether or not they have an employer. I suggested that he look at various open source projects until he found one that he could contribute to and then start adding. I said that if he can get onto the commit history of an important project, he’ll get hired. I might have even recommended a couple of projects I liked in the Node.js ecosystem.
He put on a good face. He said it was great advice and that he was going to roll up his sleeves and get started on it, but he also looked defeated. His government contract that was supposed to let him glide into his golden years comfortably was gone, and the know-it-all kid that he just bought coffee for was telling him he had to do hard work and be competitive or face financial ruin.
I think he saw me as a gatekeeper and I wasn’t opening any gates for him.
That conversation surfaces in my mind all the time. I ask myself, if I were in his shoes, would I have the energy to roll up my sleeves, learn new stuff, and contribute? Was that just bullshit advice? And would it even make any difference? Maybe the only thing that would have saved him was someone willing to take a chance on hiring him, and that person would be as likely to take that chance whether he did a bunch of open source work or not.
I was thinking about that conversation this week because I wanted to write a post about a couple investments we just made. In a way, they were the equivalent of me taking my own advice to make progress even when the opportunity wasn’t being handed to me.
I’ve always seen the startup ecosystem as a game with levels. And without judging the people that feel completely happy participating in whatever level, the range goes from people unkindly labeled “wantrepreneurs” because they go to startup events and talk endlessly about startups but never start anything, all the way up to Sandhill Road VCs at the very top level of the game who swim in oceans of capital, make nine figure bets, and blather about political and social issues to Washington Post reporters.
I’m not playing at that top level (do I even want to?), and while I may have occasionally smelt a waft of its champagne breath, I have never been been on the guest list. But since the whole thing feels like a game with levels, I maybe have a chip on my shoulder about advancing.
It’s like the opposite of imposter syndrome. A feeling of irritation that just because someone got lucky with timing and access to capital, and made a bet on Facebook or Paypal or Uber or whatever, doesn’t mean they’re actually better at this startup stuff.
See how I’m starting to sound like my Norwegian acquaintance who felt like he should have been handed a job because of his 20 years of Visual Basic experience?
So, since I’m not getting calls from Andy over at USV or Hunter at Homebrew to ask my opinion on startups, I have to do the VC equivalent of finding some open source projects and contribute to them.
In this case, if I can go find some startups that need capital that look very promising, I can use money from Kelsus, my company, to write seed round checks. The chances that one of those companies becomes a decacorn and earns me a reputation as a visionary investor are minuscule but not zero.
So, I play at being a VC, and in some way, the entire arc of Kelsus has been about me doing the equivalent thing to what entrepreneurs and VCs in the upper echelon do—but as an outsider or a c-string player. For example, when Kelsus was getting off the ground, I was a wantrepreneur. The market at the time (‘08 and ‘09) was not funding unproven founders, so my choices were:
Take time off work to build a company, get traction, and then get investment.
Do a side hustle until we get traction and then get investment.
Start the kind of business that doesn’t need investment.
I tried options two and three—with Kelsus being the result of number three—multiple times, but option one was unavailable because I couldn’t afford to take significant time off. Bootstrapping, side hustling, and consulting were my early equivalent to finding those open source projects and participating.
But now Kelsus has grown. We employee 50 software developers! When I look at the revenue coming in every month I get a weird sense of nervousness that it’s too much, and I never stop doing worst case scenarios in my head about what we would do in another financial meltdown, or another pandemic, or if all our clients fired us at once.
We are playing at a new level in this startup game. It’s honestly so amazing and so gratifying. It’s the startup overachiever equivalent of making the playoffs or getting into your college of choice—not the end of the road, the opening of doors.
At this level, I might not get quotes in Wapo, but I did secure a spot as a TechStars mentor. The work I did, and that the entire Kelsus team did, feels recognized.
Now, instead of trying to be an entrepreneur, I’m sidling up to the VCs and trying to be one of them. I’m bursting into the party, and saying “Hey guys! You guys making investments?”
We haven’t raised an actual fund, we’re just investing our own money. But it’s low risk because, as part of our investment strategy, we’re only investing in companies where the entrepreneur is willing to hire us to do development work on their product. From our perspective, it lowers product delivery risk and allows us to really know what’s happening inside our portfolio, and from their perspective, we’re a cost-effective team with skin in the game.
Since the beginning of the summer, and the implosion of the crypto market, we’ve made two investments. The first is in a company called Murabi. It’s a fintech with a white labeled card product for lenders—HELOC lenders to start out. The founder, Florian Fischetti has spent several years as a product manager in the fintech space, and knows everyone. He was also on the swim team with me at Amherst College so I’m absolutely certain that he has extremely high discipline and pain tolerance, which entrepreneurs always need, but especially during these challenging fundraising times.
Murabi’s pre-seed round is still open as of this writing, so please get in touch if you you want in before it closes.
The other investment we’ve made I don’t have permission, yet, to disclose, but it’s another fintech in the automated trading space (not crypto), and the founder is in London despite the business being incorporated in Delaware. He has experience working with Visa and another successful exit under his belt after an early career as a fintech software engineer. That funding round is also still open, so while I can’t say much more about it publicly, I’d be happy to let you know more privately.
I hope to lead Kelsus through many more of these types of investments. There is nothing more fun that seeing a company get off the ground, and I love the feeling of being part of it. Even if the kings of Silicon Valley never add me to their speed dial, I’ve found a way to play, and it is fantastic.
So I guess that advice to just do something within the area you want to work in isn’t bullshit. It is real. You want to be a writer? Write. You want to be a developer? Code. You want to be a VC? Invest (or find the closest thing to it if you don’t have capital to work with).
So I’ll leave you with my usual call to action. If you know of any promising fintechs looking for funding, send them my way!
Talk to you again in September,
—Jon