The second question on my Kauffman fellows application was how I uniquely support my investment thesis. To me, this is the underlying difference in my business model compared to traditional VCs.
"The most significant factor supporting my thesis is education, as most founders do not understand their investors' business model. When I pass on an investment opportunity, the founders want to know why.
We explain that we do not invest in a shoot for the moon or boil the ocean strategies. Our experience has shown us that these strategies often lead to binary outcomes. We believe both founders and shareholders should have the ability to run the business profitably, receive liquidity, and not end up with a zero.
Venture capitalists budget failure into their business model. Unlike their capital partners, founders do not get the benefits of having portfolio diversification. We believe founders should have career options, own most of their equity, and not jeopardize their life's work based on a VC's time horizon. This concept is a revelation to founders. They have not thought out how a traditional VC model can put them and their board in misalignment. In our experience, misaligned expectations can destroy companies."