Advice for startup founders during COVID-19: a conversation with Susan Liu at Scale Venture PartnersFeatured

I spoke with Susan Liu, principal at Scale Venture Partners, a b2b software focused venture capital fund based in San Francisco, California. Scale’s portfolio companies include Box, DocuSign, and Bill.com. Susan and I discussed advice for early stage founders, startups, and investors in overcoming COVID-19 challenges. What is your advice for founders pitching virtually? We have had virtual pitches in the past even before COVID, so it is not incredibly unusual. When we have teams we are seriously considering on the East Coast, for example, we have had them pitch through video conferencing, so it is not an unprecedented practice, and we can certainly learn about the market and product virtually.But there are a few challenging parts about committing to deals for companies we have primarily interacted with solely virtually. Namely, under normal circumstances, we do like to visit offices of teams we are evaluating to better understand their culture and working environments. So it is easier for investors to commit to investing in founders who they have gotten to know in-person over time and when there is that pre-existing relationship. To compensate for this potential disadvantage, founders can offer to have more of their team members, particularly customer interfacing roles (such as heads of sales), interact directly with prospective investors so investors can get a better sense of the team and culture even through video conferences. We are also looking more for companies that can withstand the negative impacts of a potential recession as well as companies that may even benefit from the current environment, such as work from home tools. More importantly, we are looking for companies that will not only benefit from temporary changes during COVID-19 but really permanent, lasting changes for 10 years or more. What is your advice for portfolio companies in managing team morale and venture capital investors in supporting their startups? The main focus for startups is cash right now. Our team is spending most of their time with portfolio companies that are more cash strapped, specifically companies that need to raise outside capital in the next 2 quarters. For these companies, we discuss options outside of traditional venture capital, particularly debt (whether they already have a debt line in place or need to open that line). We also spend time finding ways to reduce expenses, which unfortunately can mean layoffs and determining the best possible way to go about them. All portfolio companies have rethought their financial plan and continue to do so as the macro situation evolves. As an investor, you have a unique vantage point and the ability to understand the strategies and experiences of a wide range of companies, so you can effectively cross-pollinate this knowledge across the team and portfolio. The insights shared can be as broad as formulating game plans in market downturns or as specific as market rates for rental discounts and advice for re-negotiating rents in particular geographies. Beyond the financials, this is also an incredibly challenging time for founders emotionally. Just being there for your portfolio company leaders and even founder friends is important and helpful. While cash is king in the short term, founders can reorient themselves and their teams to focus on their long term mission to continue to give them purpose and motivation through the challenging time. Switching gears a bit, could you share more on your journey into venture from investment banking? Before Scale, I worked in technology investment banking at Deutsche Bank. I actually heard about Scale from someone in my network who knew someone who was leaving the firm at the time to go to business school, so building a strong network is incredibly valuable, particularly in the close-knit world of venture. The transition from investment banking to venture can be challenging in outwardly unexpected ways. Banking is very execution oriented with a staffer or more senior team member telling you what to do all the time. To succeed, you can just focus on doing what you are assigned. Venture, in contrast, is quite self-directed. There is no definitive “end point” because there are always more companies to reach out to or more spaces to look into. There is certainly a balance to strike, but I am still finding it.
suzanna23's profile thumbnail
Very helpful Did you see Liz Elting's article in Forbes Yesterday? Thought it was very insightful and we really need to change things up: https://www.lizelting.com/news/2018/4/27/getting-around-the-venture-capital-gender-gap Thoughts?
jessicali's profile thumbnail
Yes! As a woman in VC myself, I have been thinking a lot about this and am trying to 1) feature more female founders in my writing, 2) demystify the VC professor for women, 3) offer feedback on their pitch/deck/etc. regardless of whether our fund ends up investing, 4) help men notice when they have implicit bias against women, 5) build a strong network for female VCs to refer female founders to, and 6) be an active part of female funders communities like AllRaise and Women in VC
jessicali's profile thumbnail
Also, here is a podcast I did on supporting female founders as a female investors: https://anchor.fm/jacob-fohtung/episodes/Female-Founders-by-Jessica-Li-edq77n and here is an event I held supporting university female founders: https://medium.com/rough-draft-ventures/lets-empower-more-female-founders-across-campus-e4a7c9f8a23