Our Secret: Delivering the Same VC "Product" to the Next Generation of Founders
A lot of people ask me “Why does Equal exist?” It’s a pretty existential question, but my core belief is that we’re here to do something incredibly simple - Deliver the same VC product that founders have grown to expect, to the next generation of founders.
We’ve discussed our belief in Carlota Perez’s view on innovation cycles in pretty great detail in the past, but you can get a sense of it on our website. The TLDR is that the “Installation Period” has been about investors backing engineers building the infrastructure of the internet, leveraging their understanding of that technology to back them (engineers backing engineers). The “Deployment Period” however, is about real world people leveraging that technology to achieve production efficiencies in their industries. The technology has hit a maturity state where neither the founders nor the investors are differentiated by their technical understanding, but rather about their understanding of and ability to navigate their industry to drive economic efficiencies in the value chain.
In my opinion, nearly all of venture has been built for the Installation Period. VC culture is rooted in the engineering wings of Stanford, Harvard and MIT, not the fields, factories and offices of the mass market. As founders were building companies for the installation phase (whether they be software, infrastructure or consumer applications leveraging new technical approaches and interfaces) the venture “product” was pretty damn good. If you were building a company in any of those spaces, you could walk into a VC firm and they knew 1) your market (they may have even built a company in that space), 2) your customer (likely able to introduce you to several), 3) high quality candidates with skills relevant to your company and 4) your M&A buyers (they might be able to get you sold in a pinch). These VCs had a prepared mind on your business and were positioned to help. All in all, that’s not bad!
As we enter this new period of the cycle and founders begin building business in areas like insurance, energy and logistics, the needs of those founders have evolved but the VC industry has failed to evolve to serve them. Often these founders did not come from startup circles, making it incredibly difficult for them to even gain access to VCs. When they did, they often spent the first 29 minutes of a 30 minute meeting discussing how their market actually worked. While the VC may not have known anything about a market, that has never stopped VCs from giving their opinion, unfortunately leading to generic advice that was largely inapplicable to their industry. As it came to customers, VCs were limited in the introductions they could make given the limited knowledge and time they spent on that industry. Given that these companies had different needs and often weren’t located in the Valley, there was little help a VC could provide in recruiting either. This trend persisted when it came to M&A given the lack of familiarity with the buyers. Simply put, VCs lacked the prepared mind that they had for the prior generation of technology first companies selling to CIOs, CTOs and early adopting consumers. The reality is that this resulted in a really bad product for founders, especially at the earliest stages where VCs struggled to get conviction in market opportunities they didn’t fully understand.
Our goal with Equal was simple - to build the same product that founders have come to expect for the next stage of innovation cycle. We do this by limiting our focus to a few key markets and developing an intimately prepared mind on those industries. We spend a tremendous time researching themes and connecting with industry influencers, customers and buyers to deliver the same quality of product that founders have come to expect.
I don’t think our product offering is rare, I just think it’s incredibly rare for this next generation of founders transforming their industries. To be honest, I don’t fully understand why more people aren't doing it because it appears to be highly effective. If this innovation cycle is anything like those of the past, this generation (the “Deployment Period” founders of the internet age) will be far larger than its predecessors, which is why we believe investing in a “Prepared Mind” to build the best product for those founders is the best investment we can make.
*Read this on Medium here