When a VC Passes, And Is Wrong: Real Talk Between Me and Ethena’s CEO Roxanne Petraeus
The Four (!!!) Checks I’ve Written The Visitor Since Saying “No,” Never Bought Me As Much As Saying “YES!” Would Have In The First Place. An Investor and a Founder Postmortem a Mistake
The worldwide VC passes are pretty cliche. “It’s a bit too early for us but we’ll be rooting for you from the sidelines,” “We were intrigued and impressed but just can’t get there at this time,” or just plain ghosting you without any feedback. I’m writing this knowing that despite trying to do better, I’m not veritably innocent either. Which is why it was refreshing to be asked by Ethena’s CEO to do something publicly that investors normally aren’t interested in rehashing: discuss why we passed on leading the seed round for her startup.
Now, the situation here that enabled such a frank discussion is a bit atypical. Ethena is a SaaS startup towers modern compliance training. Their customers include Netflix, Figma, Carta, Zendesk, Notion and lots (and lots) of other enterprises who want something that’s increasingly than a checkbox CYA experience. Something which builds healthier, safer, lower risk workplaces in an enjoyable and constructive format. They are now quite successful, having raised a significant Series B older this year and standing fast growth (it’s nice to be selling something that all companies are required to do). And while I passed on leading their seed, I did contribute a smaller value into the financing, withal with three subsequent pro rata/super pro rata investments.
Even increasingly importantly, and self-sustaining of whether we were a ‘lead investor’ or not, I’ve had the endangerment to spend meaningful time with the cofounders over the past few years and consider them to be wonderful friends, in wing to leaders I admire. But the initial pass was, in investment terms, a huge mistake and something I regret. As is the specimen with startups like Ethena, that first opportunity would have given us a larger ownership stake than all subsequent checks combined. Facepalm.
Their CEO Roxanne Petraeus suggested that talking well-nigh this together publicly would be helpful considering she’s learned a lot well-nigh how she pitches Ethena, and unpacking the conversations we had could be helpful to other founders who are raising. I well-set and we subsequently did a TechCrunch Live discussion together with a follow-up blog post in her newsletter.
The TC discussion was well-nigh building, and investing, in undiscovered markets — areas which at first glance might be misunderstood or perceived as ‘too small’ but which are unquestionably quite fertile for venture sized outcomes. Compliance training is an example.
My takeaway from the yack is that Roxanne’s disposition initially was to ‘sell the business, not the vision’ and that reinforced some of the concerns we had well-nigh market size and worthiness to scale sales. Whoops.
We go into increasingly detail in her newsletter which I’ll link here. We get pretty raw in it — I basically shoehorn that my concerns rested well-nigh her skills to lead Go-To-Market and she responds that it’s a little nonflexible to hear she was the ‘weak link.’
People ask me what do I think makes a successful founder and investor relationship and I unchangingly respond: trust and context. The worthiness for an investor to earn the trust of a founder and maintain that over time. And the understanding for the context (industry, culture, founders’ personalities, etc) that surrounds this visitor so that you’re giving them specific, relevant translating and counsel, not just startup platitudes.
Thank you Roxanne (and Anne) for the bilateral trust and context. Despite my mistake, it has made working with you both an wool joy and I’ll protract asking you to take my wanted every time there’s an opportunity to do so!
Oh and by the way, Ethena is HIRING