VC's We Love! With Bob Hower of G20 VenturesOct 31, 2022
Bob Hower, Founding Partner, G20 Ventures, is one of my favorite VCs because he is an entrepreneur himself, and he empathizes deeply with the challenges that founders face each day. I also love Bob because he's my brother and has spent more time that I can count helping me with my own ventures over the years.
G20 Ventures invests in enterprise and Web3.
Here's Bob's advice...
DEB: If you had 10 pebbles to allocate to what influences you the most to make an investment, how would you allocate them between:
- a great story
- great evidence/data
- a great team
- market opportunity
- something else
BOB: (4 pebbles) For me (primarily an enterprise tech VC), I believe market selection is #1, and by that I mean has the team identified a big, urgent problem that customers will risk significant $$ trusting a start up to solve. Does the proposed/ideal solution enable a first-mover advantage for a startup (i.e. venture scale returns), and are there good reasons why incumbent vendors won’t/can’t copy the solution - i.e. eventually will incumbents decide to buy rather than build to compete when the market becomes big and compelling enough.
#2 is team/problem fit - key components: do they have a tech leader who has built a solution similar to the one being proposed; do they have a leader who understands deeply how customers buy, and how an efficient/successful go-to-market strategy will work? Do they collect Business Savvy (IQ) that allows them bring new insights/innovations into the solution design/go-to-market/customer success cycle.
#3: Unique customer Insight/evidence of demand. Does the team bring insights that most people either don’t see or would disagree with. Can we confirm that their insights in the past have been right and that they can operate quickly with focus to achieve speed and quality that others won’t match. I assume there will be 5 competitors within a year and need to feel like our jockeys can win the race once it becomes competitive.
So, race first, jockeys second and evidence third…
DEB: How do you assess the founding team? What qualities are you looking for?
BOB: The best team assessment happens when we can find objective, accomplished people who can provide backchannel references about the founders. When this isn’t possible, we I try to spend lots of time with the founders (learned this from Mom!); and when this isn’t possible, we try to dig into what the team has accomplished before.
DEB: Which questions do you think that founders should be prepared to answer?
BOB: I have so many, but there are a few that I think are crucial:
I want to understand the reason(s) founders have chosen to solve a particular problem or pursue an opportunity. Context is helpful to understand motivation/commitment level, depth of understanding of the problem, and ideally any insights that are counterintuitive or strategies that can’t be copied easily.
Sooo, I ask founders “how they decided to pursue the project they are doing”, or “what beliefs they have that are not shared by most people”, or “what is the hardest thing about what they are doing (that can’t be copied easily)”.
And more than ever, I look for founding teams that can build a (social) mission bigger than profits while establishing true connection with their employees.
So I do ask about their corporate mission, and the ways they stay connected to employees in a remote work world.
Three last basic questions: “who do they worry about as a competitive threat over the next 3-5 years (yes, there should be some type of threat as part of the answer - and rationale about how the company will address that threat).
“If they could snap their fingers and solve one problem in their business, what would that problem be (good to have some ideas about how that problem is being solved)…it’s good to have some hard problems, because it will reduce the potential threat of a competitor catching up…
And finally, I ask what have they learned since they started? Iterating around new learning is key to success, so articulating how that happens in your startup will help build credibility that execution against new problems will be an advantage not a disadvantage vs. others….
DEB: Recognizing that all founders embellish, but none should lie... How far do you expect a pitching team to go in terms of packaging their stats, status, and achievements? How far is too far?
BOB: Hard to say exactly, but it’s obvious when I see a number that isn’t representative of where the company is…harder to spot crazy exaggeration in future numbers. Founders need to support their claims with realistic assumptions.
DEB: What is the most effective way for a founder to answer a question they don’t know the answer to?
BOB: Honestly, but they should try to anticipate the obvious questions and explain how they are working to answer it. Giving ranges is fine. Not thinking about obvious questions is not fine.
DEB: Should founders send a deck to VCs ahead of, or instead of, a face to face meeting?
BOB: No hard and fast rule here. I prefer to see a deck first.
DEB: Do you care who invested in the rounds prior to the one you’re looking at? Why?
BOB: Yes, it’s always interesting to see the founder’s network and judgement about who has invested. Some early investors can provide poor advice..some give excellent advice, like getting product/market fit right before scaling sales.
DEB: What are the top 3 reasons that you don’t invest with a team?
BOB: Poor articulation of the problem (don’t know the customer), inefficient go to market (haven’t thought about how it will work) or weak experience (and not willing to admit gaps that need to be filled).
DEB: What can women, and under-represented minorities do to improve their odds of getting funded?
BOB: Network to VCs via other under-represented founders who have been funded. Work hard to get a great intro to a VC who has done deals similar to the one you are proposing. Read web sites ahead to see what the VC says about what they seek…see ours at G20VC.com
DEB: Describe the best presentation that you’ve ever seen from a founding team.
BOB: Love this Q. I think it was for a clean coal gasification technology that felt enormous, doable by the team and uniquely protectable. It failed in the end...