When the Going Gets Tough

Many venture capitalists tout themselves as being “founder friendly.”

You’ll hear things like, “we stand behind our founders” or “we’re only here to support our founders.”

If you’re young and starting a company, this kind of message can be intoxicating. You want to believe that this venture capital firm you’ve never met before has been waiting around their whole life just to give you money, just to support YOU.

At Lightbank, we sometimes get flack for not being “founder friendly” enough.

We don’t tout ourselves as being solely aligned to founders. We tout ourselves as being business builders who can and will help founders or managers build a great company.

That said, I’m amazed how often the very same firms that tout themselves as being aligned with founders seem to run for the hills when the business hits a wall or finds itself struggling.

At Lightbank, we’ve invested in over 90 companies in the past five years (not including the six we’ve started – Innerworkings, Echo, Mediaocean, Groupon, Uptake and Tempus).

If you take these 90 companies, I would say one-quarter appear to be run-away successes, half are too early to call, and the remainder have failed or are in need of pivoting their business model in order to survive.

It’s this last 25% that I want to discuss.

In almost every instance, when these companies began to fail, we found our co-investors overly eager to write off their investment and move on.

We literally would hear things like “we’ve learned not to spend time on the losers. Only the winners matter when it comes to returns.”

And you know what – they’re 100% right. They’re actually 107% right, that’s how right they are.

In venture, almost all returns come from a small handful of winners and the worst thing you can do is spend time and money supporting the losers.

And if we were running a venture capital firm – if our goal was to raise a fund, deploy capital intelligently, and raise a bigger fund – we might feel the same way.

But Lightbank isn’t a typical VC fund. At its very core, Lightbank is unique in that it’s a perpetual fund deploying mostly our own money and that of a handpicked group of investors we know well. So we don’t have to worry about LPs or raising funds or creating paper returns.

Our focus is and always has been on building great tech companies, which also means saving those that need to be saved along the way.

When our companies hit a wall, we’re there. We don’t run. We pick up a shovel and start shoveling.

We help them pivot. We help them raise money. We help them cut costs.

We do a zillion things, but what we don’t do is abandon them.

I can’t speak to Lightbank’s reputation. It’s never been something Brad and I have been overly focused on.

What I can speak to is that if you call any of our portfolio companies that have hit a wall or struggled at some point and ask them which of their investors was by their side when the going got tough you’ll likely only hear one name – ours.

It is by far the thing I am most proud of when it comes to Lightbank.

We have grit.

And because we understand failure just as much as we understand success, we don’t get overly worked up by either.