By Tom Gonser, Seven Peaks Ventures
In 2016, I bought a home in Bend, Oregon, a place where I could relax, mountain bike, fly fish, ski, golf and generally play outdoors.
After working non-stop building DocuSign for 14 years, I had decided it was time to focus on board matters and relieve myself of my operational duties.
Turns out, I don’t relax very well.
Not more than two weeks into “relaxation mode,” I was craving some tech involvement. Hardwired to start something new, I looked around Bend and quickly found Seven Peaks Ventures, a growing venture fund that was just getting started.
Seven Peaks shared a philosophy that resounded with me, a desire to help early-stage companies in secondary markets build amazing companies. Sign me up!
Over the past 20 years, I’ve focused on starting, growing and funding my own technology startup companies. At DocuSign, I had the great fortune to build a fantastic team who changed the way the world works by eliminating paperwork and created a global standard for electronic signatures and digital workflow.
During my time at DocuSign, we raised hundreds of millions of dollars, and built a company worth multiple billions. Collectively, in all my time with startups, I’ve participated in raising more than $500 million for my companies.
For me, starting innovative new businesses is the most fun you can possibly have. It’s scary and fantastic.
As DocuSign grew bigger and bigger, I started to miss the early startup days. I made the decision to step back from day-to-day operations and focus only on board and long-term strategic matters. This gave me time to spend with the startup community, and led to my decision to move into venture capital. After all, I’ve been on one side of the pitch table for well over 30 rounds of funding, so now why not just switch seats. Easy, huh?
Before I embarked on my venture journey, I asked many of my venture backers at DocuSign what I could expect as a VC. Most advice focused on the difference between being a venture advisor, and owning the delivery and execution of the business. Although the differences are stark, there are also some real similarities between a venture fund and a startup.
Raising money is part of the business
Many founders raise money, and when they do, they know exactly what they will do with the proceeds. If they do not have specific answers to this question, they will not get funded. The terms of the investment are very specific, performance targets are clear and expectations are set. Your investors expect you to perform.
VCs also raise money, but until I tried my hand at it, I did not realize how different it actually is. When I raise as a VC, I can’t yet tell my LPs exactly which specific companies I will invest in; I can only tell them our investment strategy. They are trusting that we will invest along our thesis, and we will pick the winners.
I can tell you after raising hundreds of millions as an entrepreneur, raising as a VC is more challenging in the same way that building a distribution partner is different than building direct sales.
Your founding team really matters
When you start a company, you must pick the best team to help you. These people will be with you for a long time, perhaps as many as 10 years. They need to be good, and you need to like them. Once started, leaving the founding team for “something better” should really not be an option.
Same goes for venture funds. When we raise a fund, our LPs are betting on us, just like they bet on a founding team. It may seem from the outside that some VC firms are different, but at the core they are very similar. They have the same bonds and responsibilities with their partners you do with your founding team.
The process is important
When building a company past the initial market validation phase, it is all about putting together a process that can scale, whether it’s a sales process, marketing process or product development process. These all have to be in place so you can continue to grow, and maintain repeatable success.
In a venture fund, it is also all about process, known as the investment thesis, or a firm’s operating principles. The investment thesis defines what technologies we focus on, what regions we target, what stage companies we like, and how we execute against all of these. Having this process in place means that if one of your funds is a success, it is not just due to luck, but you should be able to repeat it in following funds.
Falling in love with the deal is not permitted
One of the pieces of advice I frequently received was not to “fall in love with the deal.”
As a product/business-centric thinker, it would be something I could easily do. I start to think about how “I” would execute the plan. But as a venture investor, that’s not my role. I have to evaluate the deal and the team together.
For this reason, I might pass on something I really like because the other dynamics (team, market, timing) may present too much risk.
As an entrepreneur/operator, there are often product strategies that seem awesome on the surface. However, unless you can wrap them with proven execution that fits with what your company has proven itself able to do, it may just be too risky. This can be hard to do as a product-centric entrepreneur.
As a venture investor with Seven Peaks, I am starting to see the world from both perspectives, the entrepreneur and the investor. Both are part of the same cycle, which is creating something valuable out of absolutely nothing but hard work.
So many entrepreneurs have an adversarial opinion about venture investors, and history shows that the relationship between the two can be adversarial. However, it is also possible to find a venture partner who feels like they are on the journey with you, and that is super important for the relationship to work through all the ups and downs you are going to face together.
I’m on this journey, looking for those entrepreneurs who want to walk the path. And I’m looking forward to what we encounter along the way.
Tom Gonser is the founder of DocuSign and a partner at Seven Peaks Ventures, which will host Bonfire Sept. 27-29, an event for early-stage investors and entrepreneurs to discuss trends occurring in emerging tech ecosystems across the nation.
Photo of lake in Bend, Oregon, courtesy of Peter Starman/iStock/Getty Images