Homebrew was founded on the simple idea that there are many sources of capital at the seed stage, but there are very few seed stage investors who are willing to sign up to be the investors of record. To us, being the investor of record means being accountable to the founders, and for the company, in a way that goes beyond just providing capital. It means working alongside the founders to help ensure they build a company they’re proud of, one that matches the fidelity of vision they have in their heads. This doesn’t mean we sit on org charts or seek to make decisions on behalf of the founders – quite the opposite, we look for founders who will be successful without us, who treat their company as their first product and are intentional about the decisions they make. But we work closely with them so that the company can hopefully increase its probability, speed and scale of success.
In many of our first meetings with startups during the fundraising process, founders ask us exactly how we work with companies. So I thought it would be helpful to answer that question in public, both because it’s asked frequently and because it’s critical to the relationships that we build with founders who choose to partner with us. We have a few formal ways in which we work with founders (the informal being text, Slack, email and calls all day, every day!) during the seed stage.
When we worked on the operating side, one-on-one meetings were incredibly beneficial to us as both employees and managers. They helped gain alignment, provide support and overcome roadblocks. When we started Homebrew, we thought that 1:1s would be valuable in doing the same for us and the founders who choose to partner with us. So, after we invest, the first order of business is to schedule a weekly or bi-weekly 30-60 minute meeting, which we often describe as the equivalent of an agile “stand-up”. In that phone or video meeting (we don’t really stand!), the founders lead us through the activities of the past week and the upcoming week and then highlight the areas where they’re stuck or want help. From that last portion of the conversation, we ask the founders to assign us “homework” (no more than three assignments at a time), which we then aim to complete before the next stand-up. Our perspective is that it’s the founders’ company and they know best what the priorities and challenges are. So we take our cues from them.
For us, the beauty of this approach is that it gives us deep visibility into what the founders and company are focused on day-to-day and what’s keeping them up at night. And on the flip side, it also reveals to us what they’re not focused on. So not only are we able to be responsive to the needs of the company, we’re also able to help the founders course correct or avoid potential pitfalls that we see coming down the road based on our experiences with other teams and companies. The cadence of these stand-ups also assists all of us in establishing a foundation of trust so that there are never any surprises for either side. Along the way, we solicit ongoing feedback to make sure both parties feel like the time is well used.
Working with Homebrew was our very first foray into the venture world. We had nothing from which to compare their model of working so closely with their founders versus another company. But as we got more educated on the landscape, we have realized just how unique and special this is. The best parts for their unique structure have been two fold: there is a specific weekly forum to discuss anything that comes up on either side on a regular basis. And it really does feel like you are building your company with a partner.
– Carly Zakin, theSkimm Co-founder
As I’ve shared previously, we’re big believers in creating a board of directors at the seed stage. These meetings typically take place every 6-8 weeks and are treated as working sessions focused on the key strategic issues facing the company. The meetings tend to be fairly informal to start and become more formal as the company gets closer to a Series A fundraise. This keeps the required effort to a minimum in the early days and provides ample opportunity to practice for more typical board meetings later. The board meeting gives us and the founders the opportunity to step away from the tactical, day-to-day issues to focus on 1-2 critical questions the company needs to answer in order to reach its next milestone (typically raising a Series A). The meeting also helps all of us make sure that we’re in alignment about the company’s goals and what needs to be achieved so that we collectively want to take the additional risk associated with raising more capital.
For seed stage companies, possibly the most important decisions they make are about building the team. And in a hyper-competitive talent market, even little things can make a big difference between candidates choosing a job at one company versus another. That’s why we try to abide by a 24 hour SLA for conversations with candidates, at any level, who have job offers from our companies. Our goal in these conversations is not just to close the candidate, but to make sure that there is a strong mutual fit. We believe that as much as companies choose people, people also choose companies. And so both sides needs to feel that joining the company is the right decision. Being able to talk to the investors who chose to put capital and time into a company is often both helpful and meaningful for candidates who are trying to understand the opportunity in front of them and their career alternatives. And it gives us the opportunity to meet incredibly talented individuals who may works at our portfolio companies or go on to do great things outside of the Homebrew portfolio.
Because of his incredible willingness to jump in to speak with candidates whenever needed (even when he doesn’t know about it until an hour before…), Satya has basically become the final step in our interview process for key roles. He has been able to bring an invaluable combination of perspective on candidates’ overall horsepower, whether or not their superpower is a fit with what the business really needs and whether they will fit with our culture. And then in cases where we are in love with a candidate, we look to him to quickly validate that feeling but then close it right up! He’s batting 1000 right now and so obviously we don’t call him Satya anymore. we just call him “The Closer”!
– Galyn Bernard, Primary Co-founder
There are many founders for whom this kind of investor involvement may be unexpected. But it’s important to note that the Stand-Ups are voluntary, the Board Meetings happen on a frequency that is usually determined by the founders and in both cases the agendas are always owned by the founders. And most importantly, the data would suggest that our approach matters.
In our first fund, 16 companies have gone to market to raise Series A capital and 15 of them have been successful in raising a Series A led by a new investor. Now we could just be exceptional company pickers with founders who are gifted fundraisers, but that seems unlikely given the typical percentages in the venture business. Our hypothesis is that having an “investor of record” who has been responsible for the company is a strong, qualifying signal to new investors. Further, because we agree on what needs to be achieved to raise the A (through the Stand-Ups and Board Meetings), the companies tend to go to market when we collectively believe that they’re able to raise from a position of strength, with both strong stories and solid results.
Time will tell if our companies will continue to have this kind of fundraising success. But there is no question in our minds that our approach to working with companies is incredibly rewarding for us. Hopefully our founders feel it’s as impactful for them!
When I first met Satya and Hunter I was 25. I had never really managed anyone, or even been a part of a business at scale. The bet that Satya and Hunter made on me and my team was, in retrospect, insane. However, they’ve consistently followed through and been a big part of the Q story. Their model of working with me in regular calls and board meetings has been fantastic.
In the past 3 years we’ve raised over $70M from top investors, and the company is now over 1000 employees nationally. We have a long way to go, but we’re on the path to realizing our vision. On a personal level I credit them with helping me to scale from an early stage founder to a late stage CEO. They are a constant support, whether it is pushing through a fundraise, whiteboarding org design, pitching in to recruit top talent, or telling me to take a vacation. It is easy for investors to only be around when you’re “killing it,” but what I value most about Satya and Hunter is that they are never shy to impart the tough love that makes me and my team better…even when we think we’re killing it.
– Dan Teran, Managed by Q CEO