One of my aims for this Closing Time podcast is to explore how people in different roles, and industry sectors, approach “sales”. How does a recruiter approach her job? Or even more abstractly, how does a CEO sell her team on her vision for the company?
And Venture Capital investors are “selling” as well. Marc Andreessen is selling both to Limited Parters (LPs), on why they should invest in Andreessen Horowitz. And also to founders, on why they should take A16Z’s money, and not Sequoia’s.
So this week, I interviewed Alana Mann, a Partner at Latimer Ventures, a VC firm focused on black and Hispanic founders.
Our conversation focused on two main areas: Firstly, how do VCs “sell” to their investors? And secondly, how do VCs “sell” to founders?
Building relationships with LPs
Alana mentioned a number of principles that VCs use to raise capital from LPs:
(1) Invest in long-term relationships. Oftentimes, there is an infatuation with “getting quick No’s” — because this is more efficient. But Alana embraces the “slow No’s”. Because building relationships with LPs is a long-term game. An LP that Alana meets this week might not be a fit for investing in Latimer in 2023. But they might invest in 2024 or 2025. And if Alana has built the relationship over multiple years, when the timing is more appropriate, she’ll be ready to roll.
(2) Invest in human relationships. Related to the point above, don’t be transactional. Get to know people. Who they are, what they’re working on, what excites them, inspires them. Add value for them. VCs’ customers are LPs. And as with all customers, LPs will “buy from” people they know, like and trust.
(3) Hustle mindset. Alana mentioned that when she is in peak fundraising mode, she might do 80 meetings in a week. That’s hustling! And even when she’s not actively fundraising, she’s always looking to add more potential LPs to the top of the pipeline.
(4) Do the things you say you will do. I have heard VCs say this about founders multiple times. “Do they do the things that they say they will do?” — over months, even years. And it’s the same for VCs. If you have a first meeting with an LP in January and you say “we’re going to do this in H1”. And then you have a second meeting in July — and you did the things you said you would in H1 — that’s a very positive signal, and an incredibly powerful way to build trust.
(5) Exude positivity. Alana is an incredibly positive and enthusiastic person — it shines forth in everything she does. As she put it, “being enthusiastic is kind of a hack”. If you are genuinely enthusiastic and passionate, you can infect others with your belief. And one idea that came out of this — if you’re a sales leader or manager, it’s your job to get the people on your team to drink the Kool-Aid. And if you can’t get them there — maybe they’re not in the right role, or at the right company?
“Take my money!”
The venture capital industry often revolves around a power law dynamic — where the majority of the financial returns are concentrated in a small number of very very hot deals that go super big. And if this is true, in order for VCs to succeed and return big money to their LP investors, they need to get into these hot deals. And those deals are usually super competitive. So VCs have to sell founders on why they should take their money.
So how do they do that?
(1) Deliver value upfront. There are many ways that VCs can add value for their portolio companies — for example, by making introductions to customers, strategic partners, Corporated VCs, etc. And Alana strives to do this before Latimer invests in a company, as a way of demonstrating value to founders upfront, so that those founders then really want to have Latimer as an investor in their next round.
And Alana really practices what she preaches her. I have witnessed first-hand how incredibly collaborative she is, in making introductions and adding value — for me personally, as well as the founders she works with.
One really cool example of delivering value upfront — in a different context — is a Wefunder hiring story. My friend Classic (follow him on YouTube here) wanted to get a job at Wefunder. So he made this video (hilarious BTW!!!). He sent it to someone on our team, and they shared it on our internal Slack channel. So now everyone at Wefunder is watching this brilliant video that gives a shout out to our CEO “Big Nick”. And then we hired him to make more videos for Wefunder. If you want the job, start doing the job. And if you do it well, you will get the job.
(2) Be founder friendly. If you’re in the startup / venture ecosystem, you’ve heard the horror stories of some VCs being incredibly obnoxious and horrible to work with. This is an obvious one, but Alana is very determined not to feature in those horror stories! She’s empathetic towards founders, and committed to being extremely easy and a delight for founders to work with.
(3) First-hand experience. One of Latimer Ventures’ points of differentiation is their focus on exits — their portfolio companies actually getting to a liquidity event, in order to create wealth for their founders, and investors. Staggeringly, Alana mentioned that in 2020, only three black founders had a material exit. And Latimer’s founding partner (Luke Cooper) was one of them. He’s been there. Done that.
I think this is a really powerful point. If you’re selling something to someone, if you’ve sat in their seat, that’s a game-changer. Firstly, you know exactly what they’re going through, and what they need. And secondly, they will immediately trust you more — because they appreciate that you’ve lived their same experience.
(4) Build a strong brand. The easiest and best way for VCs to get into hot deals is to find them before anyone else. And so Alana is always out there building the Latimer brand, and her own personal brand. Going to conferences, sitting on panels, being active on social media, etc. She talks about being “omni-channel” here — rather than focused on one particular channel. And in her experience, she’s sourced great founders from a variety of diverse strategies.
The VC, with Alana Mann