Founder Unfriendly

My friend Charlie O'Donnell wrote a book, Founder Unfriendly, and I'm giving copies to every one of my clients.

Charlie spent 20 years at Union Square Ventures, First Round Capital, and his own fund backing 100+ companies. It's a great read and if you've been lucky enough to meet with Charlie, you know you're going to get clear, direct, truth. No bullshit, no nonsense.

The book is called Founder Unfriendly for a reason. Too often we glamorize venture and nobody tells you what REALLY matters from the other side of the table.

Raising capital isn't about charm, luck, or having a brilliant product. It's about alignment. And most founders go into the process without understanding what they're actually aligning to.

Here are three things, among many, in the book that are worth sharing.

1. You and your VC are not playing the same game.

This is the one founders understand least, including me when I was running companies.

Charlie writes it plainly: when a VC invests in you, you're one of 30 or 40 bets in a portfolio. If things don't work out, they absorb the loss. It is literally part of the plan. 75% of venture-backed companies fail to return investor capital. The VC expect that and diversifies across that outcome. You don't.

You have one card. Your prime earning years. Your reputation. Often your relationships. The VC needs you swinging for the fences because one big win has to cover all the losses. Your instinct to protect downside, to be prudent, to survive, works directly against what the model demands from you.

Charlie tells a story in chapter one about an ice cream company he backed called Ample Hills, a Brooklyn couple, Brian and Jackie, "who seemed to be put on this earth to create the kind of joy that one uniquely experiences in an ice cream shop." Bob Iger was a fan. They ended up with a shop on the Disney World boardwalk. Then bankruptcy. Two kids, a mortgage, no easy path back.

Charlie's regret wasn't backing them. It was never asking the question: "I should have had them acknowledge it — to say it to me — that the chance of taking this national is more important than avoiding failure."

Venture is an asset class that is not for everyone. There are other ways to build great companies and if you're not aligned with the "as big as possible, as fast as possible" venture path and comfortable losing it all, you should reconsider raising venture.

You should think very strongly before you raise that first institutional round.

2. Investors don't hear your reasons. They hear what your reasons reveal.

There's always a reason things didn't go as planned. Always.

When you think you're sharing reasons, investors are hearing something else.

"Founders sometimes think they're reasonably explaining a problem. Investors hear it as an admission of fragility."

His examples: "We couldn't grow without a marketing budget" means "we don't have a scrappy, repeatable path to growth." "Our developer had to take a full-time job" means "our company can be derailed by one person's life change."

The investor sitting across from you has seen a hundred companies with the same headwind who found a way through anyway. They're not judging whether it was hard. They're judging what you did with hard.

This is true in coaching too. The story a leader tells about why something didn't happen tells you almost everything about their self-awareness. It's worth asking yourself: am I explaining, or am I excusing?

3 Regular communication builds trust.

Charlie writes about something he calls the Heartbeat Email. A regular, personal note to your network. Not a company update. Not a newsletter. Something human, wins, struggles, what you're reading, a question you're wrestling with. His argument: people fund and hire humans, not job titles. The founders who stay visible and real between the moments when they need something are the ones who have a network that shows up when it matters.

I urge all my clients to send a Friday Update for this reason and many more. It builds trust and gives before ever asking. Investors, teams.... people, want to know you and build a relationship over time that is not transactional. Sharing regular, real updates builds trust and that compounds over time.

It's rare to hear from someone who has been there and done it and who will actually tell you the truth. Thank you Charlie for this behind the curtain look at what venture is really like.

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