Venture capital expert Scott Barker knows the right startup ecosystem includes access to capital, but also expert knowledge and networking opportunities.
When thinking about what a startup needs to succeed, most founders gravitate toward one thing — money. Secure funding, impress investors, and win the startup kingdom. Yet, just as a plant seed needs a support network of sun, nutrients, and water, a seed company needs the right environment to survive and thrive. Creating the right environment takes more than money.
Scott Barker, former director of strategic engagement at Outreach and Head of Partnerships at Sales Hacker, recognized that the right startup ecosystem included access to capital but also expert knowledge and networking opportunities. This is why he co-founded GTMfund, the strategic VC fund Scott co-founded that’s focused on seed and Series A companies. The fund’s tagline explains it all: “Raise money from revenue execs who have been there, done that.”
How does it work? Scott and his team identify knowledgeable operators — successful major players from companies like Salesforce, Zoom, Snowflake, and DocuSign — who want to invest in the next generation of B2B SaaS innovators.
“The original thinking was that we could bring together 30 friends who are incredible leaders, pull some of that capital, start placing some bets on some really high-quality founders, and then have an outweighed impact on the success of those companies,” Scott says.
The plan worked. After just one year, 21 of GTMfund’s first 22 portfolio companies have raised subsequent rounds at higher valuations, and they have over $23M in capital under management.
Here, Scott breaks down:
- The Advantages of a Strategic VC Fund
- The Current Fundraising Landscape
- The Best Way to Form Your Cap Table
- The Key to Productive Investor/Founder Relationships
1. The Advantages of a Strategic VC Fund
GTMfund’s limited partners (LPs) are seasoned veterans in their own right, and most have experienced the journey from zero to IPO. So it makes sense that GTMfund operates as if it’s a startup that’s building a product of its own.
“Although we’re a venture firm, we look at it like we’re building a product. And that product is the flow of value from our LP’s brains into our founders’ and their executive team’s brains,” Scott says.
There are several ways that knowledge flows to the benefit of all parties.
The GTMfund Slack channel is a gold mine where LPs and founders can share and gather wisdom related to their specific goals and challenges.
“Our founders often say it’s where they go to get ‘unGoogleable’ answers,” Scott says.
For example, one founder was desperately searching for an SDR-onboarding playbook to use as a model. While Scott was on a Zoom call, he crowdsourced his LPs in Slack and immediately provided the founder with three SDR playbooks. If founders are looking for anything from a product-led growth (PLG) strategy to comp plans, answers are nearly always at their fingertips.
The Slack channel is also a place for introductions and door-opening conversations at GTMfund. Founders see Slack messages as starting points that piggyback into more formal introductions and deeper discussions with the “best fit” LPs.
“We’ll make a connection so that the founder can go deeper on that topic and perhaps other topics as well. So then there’s this mentorship layer that happens,” Scott says.
Deep Dives and Meet-Ups
GTMfund also hosts monthly sessions where LPs can delve into specific topics that benefit multiple founders.
One recent session featured Udi Ledergor, CMO of Gong. A marketing VP five times over with 20 years of industry experience, Udi’s presentation aimed to teach founders everything they needed to know about branding.
Occasional in-person dinners and retreats aim to bring GTMfund contacts together in person, while podcasts and newsletters featuring LP-created content provide even more avenues for education and connection.
Incentives for Limited Partners
While GTMfund appears to be a paradise for founders, it’s also a rewarding environment for the fund’s LPs. Again, success here isn’t just about money.
The more successful the fund’s companies are, the more successful LP investments are. Yet LPs also get a chance to stay on top of the latest tech innovations, and the connections fostered through the fund can also turn more serious down the line.
“On the operator side, many of them want to get exposure to early-stage tech, because they are looking to become advisors or board members in the future,” Scott says. “They want to keep their pulse on early-stage technology, and GTMfund gives them that opportunity as well as a community of like-minded people where they can solve their own problems.”
With the right ingredients in place, founders and strategic fund LPs can navigate toward a faster on-ramp to value and scalable success.
2. The Current Fundraising Landscape
In 2021, the most significant “problem” many founders faced was how to choose the best funding package from dozens of offers. In fact, that’s why GTMfund was originally formed: to stand out from other offers by providing not just funding, but strategic added value.
Today, that value continues even though the state of fundraising is the polar opposite. Collaboration and guideposts are doubly essential in a fundraising landscape that’s changing swiftly.
“It’s getting harder to fundraise. Valuations are going down considerably,” Scott says. “The macroeconomic climate has shifted dramatically, and some people are clinging to 2021 valuations.”
According to Scott, here’s how founders should be approaching fundraising today.
Schedule Fundraising Meetings Strategically
It’s not unusual for founders to have dozens of investor meetings queued up in a short 4-week period. While it may be tempting to talk to your top choice first, Scott recommends “tiering” your appointments so that you save the best for last.
“Keep your Tier 1 conversations toward the end so that your pitch is super tight for your ideal firms, and you can name-drop other people you’ve talked to,” Scott counsels.
Time to practice also ensures you can follow Scott’s other advice — to have a great deck but not rely on it. Your best bet is a conversation that is passionate, not scripted. Aim to have a genuine discussion about the category and send the deck as a follow-up item.
Focus on Your Competitive Advantage
In a cutthroat funding environment, highlighting how your startup differs from the competition is critical.
“You need to show more than ever a good understanding of the competitive landscape — and why you’re going to be able to beat not only your direct competitors but also those fighting for the same budget across many different categories,” Scott says.
It’s no longer sufficient to consider direct competitors. When buyer and investor budget belts tighten, you also need to consider how your offering measures up against entire overlapping categories that might consolidate in the future.
Build a Community
To further stand out to investors, some savvy founders focus on building an initial community in tandem with their software to showcase tangible proof for demand. This can be a perfect sell if you are early-stage.
“You don’t have to have a product that’s product-led growth,” Scott says. “You can take those same principles and apply them to a community that can turn into customers of your software.”
In short, an existing fanbase always goes a long way when wooing investor wallets.
Extend Your Runway
Finally, investors will appreciate any intentional moves you’re making to conserve runway and increase profitability. A year and-a-half ago, the path to profitability didn’t matter as much to investors, but today it does. Demonstrating that you can be profitable in a short time frame will be sure to impress.
Here are a few ways that Scott says early-stage founders can extend their runway:
- Be selective when it comes to pricey “human capital,” and be sure to hire A+ players.
- Hire contractors and agencies to cut down on in-house costs.
- Know your customer acquisition channels and costs inside and out — or bring on a CMO who does.
- Consolidate your tech stack so you aren’t paying for the same service twice.
In the past, tech companies often identified a big number they wanted to hit and then hired the number of employees that could get them there. But today, it’s more important to create demand before you make hires.
In sum, it’s not a grow-at-all-costs world anymore. It’s a sustainable growth world, and it’s important to reflect that in your pitching and fundraising.
For more details on the types of capital available to founders, read Startup Capital: 5 Popular Funding Sources in 2022.
3. The Best Way to Form Your Cap Table
Early-stage companies don’t build boards in the same way that more established companies do. Instead, the primary focus is on building their cap table.
Why is this important? Your cap table will help inform what your board looks like down the road. If you choose wisely, your cap table selections can also increase your growth and subsequent valuation.
According to Scott, selections for your cap table should be informed by 3 primary pillars:
The Brand Pillar
Brand name matters when forming your cap table — and we’re not talking designer labels. Partnering with well-known VCs like Sequoia and Andreessen Horowitz will undoubtedly make subsequent fundraising easier.
“Those are incredible firms that provide a lot of value. They are a strong signal to the market, and they’ll help you in future rounds because people look at them as the ‘tier ones,’” Scott says. “So if a tier one firm is in, it’s going to make it a lot easier to continue to raise capital.”
Having a household VC name on your cap table can be the equivalent of a golden ticket when it comes to the health and longevity of your funding.
The Strategic Pillar
Strategic selections are those that you know will help you move the needle. In the past, strategic picks consisted of a dozen or so angel investors that a founder thought would help them navigate the startup ecosystem. Now, strategic funds like GTMfund and Founders Fund serve a similar purpose.
“Today there are these more strategic funds that will really roll up their sleeves and help you with whatever their ‘thing’ is. For us, it happens to be go-to-market,” Scott says of GTMfund.
Whether you target angel investors or go the VC fund route, approach the process with strategy in mind.
The Category Pillar
You should choose your third and final selection from the category your business targets. Whether they are angels or VCs, think about the contacts and groups in your extended network who have direct experience in your area.
Scott puts it this way: “Who has picked the winners in that category before?”
For example, you might target Shopify Ventures if you’ve founded an ecommerce business or Salesforce Ventures for sales. This last pillar spans both the brand and strategic buckets, but is a critical consideration in its own right.
4. The Key to Productive Investor/Founder Relationships
Your work doesn’t stop once you cultivate your investor dream team. The next challenge is to maximize those relationships with a crystal-clear flow of communication.
Although investors are busy juggling many different balls professionally, they still want to help you if they commit to funding you.
Here’s how Scott says you can maximize productivity.
Keep Your Asks Clear and Consistent
Clarity and repetition are the first keys to securing the help you need. The more you reiterate your list of (very specific) asks, the better.
The most logical place to keep track of your current asks is at the end of each monthly investor update. Scott recommends keeping a bulleted list at the bottom that lays out what you need so investors have an ongoing reminder of how they can help.
If you formed your cap table with care, you have access to investors with strategic and category strengths. Play to those wisely.
“Know the strengths of your VCs and play into those strengths with the questions you ask, and make it easy for them to fulfill those asks,” Scott says.
Close the Loop
Once a VC delivers on one of your asks, the next key is following up. As a professional courtesy, you should keep them informed that you acted on their advice or made progress because of it.
“If the VC does something for you, close that loop. Many great founders will do shoutouts in their monthly updates, like ‘thanks so-and-so for X, Y, Z.’ Or send them an email or text noting that you had a great conversation thanks to an introduction they made,” Scott says.
Cultivating a positive feedback loop will ensure that your investors feel more invested — pun intended — than ever before.
Use Technology to Communicate
Effective communication can also take place beyond the confines of formal reports. Productive communication across all appropriate channels is often welcome and encouraged.
“The founders who text me can get things done super quickly. I think VCs are on their phones a lot, and email is usually super messy. So try and get on a texting basis with your VCs,” Scott says.
Finally, take time to explore modern tech that allows you to further unlock the power of your investor network. For example, Scott is a big fan of Cabal, a platform that lets you upload a list of your target accounts and a list of your VCs — and then see who’s connected to whom.
Once you reach the board-formation stage, you’ll also want a board portal platform like OnBoard that can help you host smarter fundraising meetings, track tasks, and easily store financial documents.
The New Era of VC Firms
Whether the economy is up or down, one thing is clear — VC firms that go the extra mile will position founders and investors for optimal success.
Scott sees this recognition resulting in a new breed of VC firms that will transform investing in the years to come.
“Modern VC firms are going to become more like platforms. The three pillars of those platforms are the fund — the financial vehicle that allows you to help founders. Then there’s the community element to it. And the last piece is media,” Scott says.
When you have an engine that allows you to network, create categories, and control the narrative, the overlay of fund, community, and media can unleash a powerful snowball effect that’s the equivalent of fertilizer for a fledgling startup.
Supercharge Your Startup with OnBoard
There’s no question that raising startup capital requires drive, competitiveness, know-how, and organization. Once you’re ready to form a board, OnBoard board management software is here to help.
About The Author
- Josh Palmer serves as OnBoard's Head of Content. An experienced content creator, his previous roles have spanned numerous industries including B2C and B2B home improvement, healthcare, and software-as-a-service (SaaS). An Indianapolis native and graduate of Indiana University, Palmer currently resides in Fishers, Ind.
- Board Management SoftwareOctober 26, 20235 501c3 Board of Director Requirements
- Board Management SoftwareOctober 16, 2023What is a Corporate Resolution? (Overview, Definition, and Examples)
- Board Management SoftwareOctober 12, 2023How to Conduct a Board Self-Evaluation (Step-by-Step)
- Board Management SoftwareOctober 3, 2023How to Remove a Board Member (+ Sample Letter)