On angel investing, boards, and fundraising with Joanne Chen, partner at Foundation CapitalFeatured

I spoke with @joannechen, partner at Foundation Capital. Joanne focuses on AI first B2B applications and data platforms. She is on the boards of Tubi (recently acquired for $500m), Mya, Tonkean, EraDB, SafelyYou, and FoxEye. She has also invested in CaptivateIQ, Oasis Labs, Brightback, and others. Prior to Foundation Capital, Joanne was an angel investor at Hyde Park Angels and has worked with Probitas Partners, Jefferies, and Cisco. Joanne shared her advice on angel investing, being a board member, sourcing, and fundraising. On angel investing, Joanne underscores the unique incentives of angel investors. Beyond the performance driven focus shared by all investors, angel investors are also driven by an emotional connection to their startups and frequently seek a way to connect to specific communities through their investments. Founders seeking angel investment should better understand the exact motivations of their target angel investors and tailor their messaging accordingly. Groups of angels come together through organizations like Stanford Angels or Sand Hill Angels to collectively invest in startups, but they may have slower timelines relative to traditional institutional investors. While angels frequently invest early in pre-seed or seed stages, they can also come into later stages rounds in the Series A and B, so founders raising later stage rounds can keep angels in mind as well. On being a board member, Joanne highlights the advisory nature of the role. Rather than dictating, you are providing high level guidance. For founders, it is crucial to think about your board composition as a whole and optimize for having the right group of people with complementary skill sets around the table, rather than focusing too much on each individual in isolation. Investors in general can help founders prioritize their focus, make introductions to their first few customers as they are doing market discovery, and shape the culture through finding the first few team hires. On fundraising, Joanne encourages startups to write an investment memo from the perspective of their target investors. Doing so helps founders more strategically structure their pitch to highlight the key upsides and risks succinctly instead of diving too deeply into unnecessary or overly specific details. On sourcing, Joanne highlights the critical role of relationship building with other founders and investors to this end. General marketing, such as speaking at events, can help with top of funnel as well but frequently this top of funnel sacrifices quality for quantity. Recommendations from investors and founders who know your focus areas well are much more helpful in un-surfacing the best fit deals. On building conviction in investments, Joanne notes that practically all early stage investing decisions have some aspect of irrationality: the odds are stacked significantly against any startup. To prepare for this type of decision making, strive to deeply understand the landscape and rigorously benchmark each company relative to others, especially in similar spaces. Spend time with the founders and the team to see if you have strong chemistry. Ensure that the time you spend with the company and in studying their solution and problem space truly energizes you. Balance being opportunistic and thesis driven. Build your thesis around markets of interest but be opportunistic when needed within these markets. Find founders with incredible persistence, resilience, and stage and problem fit. Look for people with a growth mindset (an ability to evolve with the company) and incredible execution ability.