Only two-and-a-half years ago we welcomed Vetri and Ally.io into the Founders’ Co-op family. Today, we’re congratulating them on joining the Microsoft family, where their vision to bring purpose and alignment to the employee experience will continue towards global scale, but now on a radically accelerated timetable. While we’ll miss spending time in the trenches with Ally.io’s fantastic leadership team in this next stage of their growth, Microsoft is and always was the perfect long term partner for them, and we couldn’t be more thrilled for everyone involved.

All startup journeys are different, even the wildly successful ones. In the past couple of weeks we’ve had the opportunity to celebrate an 11-year journey from first check to IPO with Remitly and now this much shorter journey from first check to blockbuster acquisition. To us, both paths feel just as complete. When we partner with founders, we’re backing them and their vision, and the best part of the job as an early stage investor is the moment when that vision grows into something that’s bigger than we or they ever imagined. (That and making our LPs happy, which goes hand-in-hand with these kinds of successes).

When Chris and I first met Vetri, we knew that he was going to build something special. We just didn’t know how quickly he’d do it. Today, Ally.io serves over 1,000 customers and employs over 250 people across multiple continents. And they’re just getting started. 

Vetri is a man on fire with the passion to impact and elevate others, delivered through a rare balance of charisma and humility that we look for in every new founder that we meet. Thank you Vetri and Ally.io for selecting us to lead your seed round and inviting us to go on this journey with you. It’s been a privilege, and you’ve made us better investors for the experience.

Today Seattle fintech unicorn Remitly (NASDAQ:RELY) begins its journey as a public company. This is obviously a huge milestone for the founders, not to mention the 1,600+ employees who have joined them along the way. It’s a different kind of milestone for me as an investor: 10 years ago I led the company’s Seed round and joined the board, where I served until the Series C. Today marks the first time in my investing life that an investment I led at Seed has made it all the way to its Wall Street debut.

I know this is a familiar experience for many of my peers in Venture Capital. And 10 years is a long time to wait in any career before achieving an important milestone. But for me, and for the investment partnership I co-founded, it still feels like a moment worth celebrating.

Today I’m feeling both lucky and grateful to have met the founders of Remitly when I did. Matt, Josh and Shivaas helped me learn early in my VC career what good really looked like. Not for their feats of “blitzscaling” or similar startup hype-factory nonsense, but for exactly the opposite: for methodically building a product and a culture that delivers real value to real people, with genuine care for the humans involved, fused with a relentless desire to get better every day, no matter how many days it takes.

Every founding team is unique, but my journey with Remitly, beginning as early as it did, helped me to see the raw excellence hidden in those that came later, from Outreach and Auth0, to Bluecore and Amperity, Ally and Level Ten Energy, Shelf Engine, Routable, Comet ML and a dozen others whose names you haven’t heard yet (but I expect you will). Along the way, I had the incredible good fortune to team up with a founder from our first fund — Aviel Ginzburg — as my investing partner. Our shared decade-plus as investors in over 250 companies — both as VC partners and in our roles leading Seattle’s Techstars programs — has built a foundation of trust, experience and craft that makes even our bad days good, and our best days better than “work” has any right to be.

The world of software investing has changed dramatically since we started Founders’ Co-op back in 2008. Things that seem obvious now — the collapsing cost of starting a software company, the corresponding ascendance of Seed (and now Pre-Seed) as the first institutional funding stage, the steady erosion of Bay Area dominance in company formation and the related rise of new centers of excellence in Seattle, Austin, New York, LA and beyond — all of these were unknowns when I began my journey as a venture investor.

I fell in love with the Internet back in 1993 and spent my first 15 years as a founder/operator, creating and launching Patagonia’s first online store, bootstrapping an ecommerce software startup to $15M in revenue before selling it to a public acquirer, co-founding — and failing at — a venture-backed startup, before switching roles to help other founders as an investor at the earliest stage.

The ‘aha’ moment for me came after moving back to my hometown of Seattle after many years in California. Founding a company here, even with the support of local and Bay Area VCs, was ten times harder than bootstrapping my first company in San Francisco had been. From raising money, to attracting great talent, to finding a local peer group of high-performing founders, building a startup in Seattle was frustratingly, unnecessarily hard. In a market so rich in engineering talent and an incredible — if concentrated — history of tech wealth creation, that seemed like a problem worth solving.

Like any startup journey, the years have been short but the days long. As a self-taught VC I learned my most important lessons the hard way. And the most enduring lesson of all is how long it takes to build anything of real value, whether it’s a company, a venture firm, or a startup ecosystem.

The venture industry values speed above all else, but today I know that every story of overnight success you read in the trades has been carefully pruned and compressed to create the illusion that the journey was both short and wildly successful from the beginning. Not only is that a misleading and disheartening lie to first-time founders, it dishonors the grit, craft and resilience of those few founding teams who do make it all the way to the public markets.

Ten years later, Seattle is still mostly a company town, where big employers like Amazon and Microsoft dominate the talent market and founders have to be twice as capable, persistent and resilient to raise their first institutional round. I still feel like an outsider in the very insider-y business of Venture Capital. And I still have so much to learn. But today I’m feeling grateful for my amazing investing partner, the extraordinary founders we’ve backed along the way, and all we’ve learned and done together that has brought us to this point. Go Remitly, and thank you Matt, Josh and Shivaas.

Why did you start Ganaz?

My whole career has been driven by the belief that you can build a virtuous cycle between workers, employers and downstream retailers and consumers. I was at Fair Trade USA for many years building that belief into a thriving market for Fair Trade produce. And while I was there, I watched farmworkers adopt cell phones and then smart phones. The industry was trying to solve huge problems including a painful labor shortage, food safety, and compliance with complicated labor laws. White collar industries had their pick of incredible people platforms like Gusto. But in agriculture, there wasn’t a single software platform that had figured out how to serve this industry well–to help it run more efficiently and take better care of its workers. I figured we could build that and build it better than anyone else because we intimately understood each part of the supply chain and really cared about each of them.

Why did you decide to work with Founders’ Co-op?

We had the great fortune of getting into Techstars in 2018, and Chris Devore was the Managing Director at the time. I had the opportunity to get to know Chris and Aviel during Techstars and came to trust them and really appreciate how they challenged us. It’s rare you have the opportunity to spend four intense months getting to know an investor, so when he offered to lead the round, it was a no-brainer. Chris is one of the wisest and most emotionally intelligent investors I’ve ever met. I’ve been incredibly lucky to lean on him and learn from him for the past few years.

Words of Wisdom

Be clear and insanely dedicated to the impact you want to have on the world. Be flexible about how to achieve that impact. Originally, our idea was to be a labor marketplace like Glassdoor for farmworkers. It didn’t work, but I knew there were other ways to have a huge impact on this population, so we pivoted. But in retrospect, we could have pivoted more quickly and more decisively.

Why are you building Ganaz in the Pacific Northwest?

The PNW is home to me, so, selfishly, that’s where I wanted Ganaz to be headquartered–not to mention the great technical talent, huge agriculture industry, and a more accessible and welcoming tech ecosystem. I am an outsider to the tech industry, and yet I found a community in Seattle that welcomed me, encouraged me, and helped me network my way into the connections we needed to get Ganaz off the ground.

Aviel and I are thrilled to share the news that we’ve just closed a new fund, our fifth, and at $50M our largest yet.

In most ways, this is just business as usual. Our LPs, many of whom are founders themselves, love our commitment to being first and fast, writing high-conviction pre-seed and seed checks to the best technical founding teams in the Pacific Northwest. We have an enviable track record of helping those founders raise from the best later-stage investors in the world. And with over 200 companies in our combined portfolios, we’ve assembled the most powerful founder support network in the region.

What’s different this time is mostly how the world has changed around us.

When we started Founders’ Co-op back in 2008, Seattle was still a company town. Amazon and Microsoft dominated the market for talented software developers. The Bay Area still reigned supreme as the center of the startup universe. And billion-dollar startups were so rare they didn’t even have a name.

Five funds and over $100M later, the world looks different.

Seattle has become one of the most important cities in the world for cutting-edge engineering in cloud, machine learning, and enterprise software. Every global tech leader has a footprint here, many employing thousands of developers locally, creating a vibrant and highly liquid talent market.

At the same time, the Bay Area’s dominance of startup culture has eroded, partly due to a recurring failure of civic leadership, accelerated by COVID and the shift to remote work. Meanwhile, our company town has become a place where ambitious founders increasingly choose to build their startups and raise their families, even if the growth capital they need still comes from somewhere else.

We were lucky enough to team up with many of these founders at the beginning of their journeys, writing the first institutional checks into a growing herd of Seattle unicorns like Remitly, Outreach and Auth0. We created the Techstars Seattle and Alexa Accelerator programs to bring the community together around the region’s most promising founding teams from the very beginning. And we partnered with the University of Washington to house all these activities on the UW campus, injecting a new current of entrepreneurial energy into the region’s flagship research university.

So while a new fund doesn’t change much about who we are and what we do, our market is on the verge of an explosive wave of entrepreneurial growth, and we couldn’t be more excited to partner with the next generation of amazing founders at the beginning of the best startup decade this region has ever seen.

We want to express our deep gratitude to the fund investors who make it possible for us to do our work (many of whom have been with us since the beginning), and to the extraordinary founders who have welcomed us into their lives as investors and business partners. We love what we do and feel lucky we get to take another swing.

Here we go.

Last week I spotted this annotated twitter thread from Fred Destin, which he kicked off with a simple question:

As founders-turned-VCs, Aviel and I have always relied on the “golden rule” principle — treating founders the way we wish we had been treated when we were in their shoes — when deciding how to build our own firm here at Founders’ Co-op. 

As operators, we were lucky to raise from some pretty amazing VC role models, people like Brad Feld at Foundry Group, Ethan Kurzweil at Bessemer Venture Partners, and Karan Mehandru at Trinity Ventures. But along the way we experienced many of the behaviors Fred’s post talks about, so we know how awful the experience of raising VC can be.

Our first reaction to reading Fred’s post was that, by relying on our own experiences and learning over our 10-plus years and 200-plus early-stage investments, we’ve developed a strong shared view of what our customer experience should feel like. But one thing that really jumped out at us was how bad a job we’ve done at telling founders exactly what they can expect from us.

A wish becomes a promise when you put it in writing. This post is our first attempt to lay out our customer experience promise to the founders we work with, so that anyone we engage with knows what to expect, and so we can be held accountable for failing to live up to our ideals.

In the process of writing this post we realized we had a lot to say on the topic. Since most founders are too busy to read long blog posts, here’s the tl;dr:

– Tell the Truth
– Be Fast
– Give First
– It’s Your Company
– Be Human

For those with more time, here’s what we mean by all that…

Tell the Truth

Success in venture investing is random and unpredictable. Ideas that start out bad often get better over time as founders learn and adapt. Weak teams can get stronger as co-founders come and go. The instinct in venture is to never close a door on a founder or investment opportunity, because maintaining optionality over time is how you get into that one great deal when the time is ripe.

From the founder’s perspective, this makes it seem like every VC is a pathological grin-fucker. Everyone wants to be your friend and nobody will tell you your baby is ugly, and yet somehow they also don’t want to write you a check today, for reasons they can never quite explain in a way that feels true. So you wander from fancy office to fancy office, never knowing where you stand and just wishing someone would be honest with you for once about what they like and don’t like about your team, your company and your opportunity.

Our promise to founders is to always tell the truth. If we like something, we’ll tell you we like it and try to explain the reasons why. If we don’t like something, we’ll do the same. And if we aren’t sure what we think, because we don’t know enough yet and need more time to see if we can get our heads around it, we’ll tell you that too. But we won’t use that last one as a ploy to string you along and buy time to see if something changes that makes us like it more. Which brings us to:

Be Fast

No professional is more time-crunched than a seed-stage founder. Every single function that is staffed by a senior leader and their supporting team in later stages — from product, engineering, sales, marketing, finance, operations, and customer success, to taking out the trash and resetting the WiFi router — is 100% on the shoulders of you and your co-founders. Wasting a founder’s time is stealing their most precious resource, and reflects at best a lack of empathy, at worst a lack of respect.

Between our own fund investing and our years as Techstars Managing Directors, Aviel and I have participated in and coached founders through over 200 seed-stage financings. We’ve seen every possible flavor of time-wasting VC behavior, from never-ending requests for additional “diligence” information (this for companies with typically less than a year of operating history and often no product or customers), to weeks or months of inconclusive meeting requests involving a shifting cast of characters and no clear decision-maker, to outright ghosting without even the courtesy of a polite ‘no’.

Our promise to founders is to never waste your time. Aviel and I are the only people you need to talk to to get an investment decision. If it’s a no, we’ll tell you within 24 hours or we’ll explain why we need more time. If it’s a yes, we’ll tell you we’re headed that way and what we need to learn in the following week or two to make it official. There should never be enough distance between our final answer and our last interaction to leave a founder surprised. And while we have to gather certain information to protect our investors and make sure we understand how you think about your business, we won’t make you do our homework for us, or demand artifacts that no early-stage business should have wasted a minute creating.

Give First

VCs like to talk about their “value add”, all the ways in which their help is worth so much more than their money. Some of the biggest firms (Andreesen Horowitz was among the first and has taken it the furthest) have built full-fledged, free-of-charge consulting shops on behalf of their portfolio companies, with huge operational support teams that help with everything from recruiting and business development to culture and training. No matter the scale, the implicit promise is this: “if you take my money, I’ll help you build your business”.

Like Fred, I thought one of the best responses to his post came from Natty Zola, MD of Techstars Boulder and GP of Matchstick Ventures: 

Natty’s answer is an elaborated version of Techstars’ prime directive: Give First. Instead of using the power imbalance between investors and founders as leverage, “add value” and earn trust by giving it away.

Founders’ Co-op partnered with David Cohen and Brad Feld to create the Techstars Seattle program back in 2010, one of the first expansion programs in what’s now a global network of entrepreneurial support offerings. Before joining the fund full-time, Aviel helped build and lead the Alexa Accelerator, another Techstars program created in partnership with Amazon’s Alexa Fund to support the global voice and conversational AI ecosystems. We’ve both seen up close how powerfully the “give first” mindset unlocks value for founders and investors alike.

If you’re a founder building a venture-scale company in the Pacific Northwest, in a domain that we know well enough to actually be useful to you, we promise to offer our help before we ask you to take our money. Whether it’s customer intros, recruiting leads, or even connections to other investors, we’ll do our best to show you how we work with founders before we invest, so you can make an informed decision about whether we really are worth more than our money.

It’s Your Company

One of the biggest worries founders have about raising outside capital is the risk of losing control of their own company. And while VC investments don’t usually give investors much say over the day-to-day operations of the business, that doesn’t stop some of them from acting like they run the place.

Running a fast-growing startup is one of the most confusing and stressful jobs in business. There’s always too much to do and not enough people to do it, the runway clock ticks louder every day, and the survival of the business is always in doubt. It can be hard for founders caught up in the daily shitshow to think about anything else. But for exactly that reason, nobody knows more about what’s working and not working than the founders, and nobody will ever care more than they do about the company, its employees and its customers.

Where founders go deep, investors go wide. We’ve seen some version of the same movie play out dozens — or in our case — hundreds of times. The characters and situations may change, but the fundamentals are often eerily similar. But when it comes to making a specific decision about a specific problem in your business, we always trust the founder’s depth and commitment more than our broad-but-shallow pattern-matching ability.

If you take our money, we’ll do everything in our power to help you succeed. We’ll open our networks, share our experiences and act as thought partners whenever you’re facing a tough situation. It’s our obligation to ask questions and share our perspective to help you get to your best decision. The one thing we won’t do is tell you how to run your business — no matter how hard the conversation gets or how strongly we disagree, our final words will always be: “it’s your company”, and we’ll mean it.

Be Human

We named our firm Founders’ Co-op for a reason. Our theory of change — the one principle that our entire worldview as investors is built around — is that founders: extraordinary, unreasonable, obsessive, complicated human beings, are the engine of all positive change in the world. Truly great organizations aren’t built from clever market analyses and slick packaging, they’re built by small teams of superheroes who “can’t not do” the one thing they’ve set out to do.

This worldview comes with a whole set of corollaries and implications, some obvious, some less so. At the more obvious end, it means that when we invest in you, we’re investing in *you*, not your idea, your traction, your deck or any of the other artifacts that founders are often asked for when performing the strange mating dance of the venture capitalist. It also requires us to look in the mirror at our own quirks and peculiarities, to show up as ourselves in every interaction we have with founders, so that when we choose each other we do so as humans, not as checkbooks or cap tables.

At the less obvious end, a human-centered approach to venture investing means that relationships are forever, potentially spanning decades and multiple companies, through good times and bad. As long as we always do our best, treat each other with respect, don’t betray trust or take advantage of one another when the seesaw of leverage tips temporarily in our favor, our relationship will become an enduring source of joy and strength for both of us.

Signing up for a deep and long-lasting personal relationship may sound like more than you want from your investors, when everyone’s money is the same shade of green and the idea of “VC value add” smells like the typical bullshit that people with leverage use to get over on those still coming up. If so, we’re probably not your guys, and that’s OK.

Feedback

The way we see ourselves is rarely a perfect match to how others see us. And our behaviors don’t always line up with our ideals. But if we tell you what we stand for and invite you to hold us accountable, it lets as little daylight as possible exist between our intention and your reality. We’re proud of our firm and the work we do, but we’re human too, and if we are thinking of choosing each other, we should both be able to make that choice with clear eyes and open hearts.

The U.S. spends about twice what other high-income nations do on health care, but with results that are often worse than those countries achieve at much lower cost.

In 2009, in a national effort to improve quality and lower costs, the Federal government launched a huge incentive program to drive the adoption of Electronic Medical Records (EMRs), spending an estimated $40 billion over the past decade to implement this data-gathering technology in hospitals across the country.

This massive national investment in data infrastructure laid the tracks for system-wide breakthroughs in data-driven healthcare, but the benefits of that investment have been tantalizingly slow to appear; growth in US healthcare costs continues to outpace inflation, and the category now accounts for more than 18% of GDP

Today we’re proud to announce our investment in MDmetrix, a company that harvests the massive, minute-by-minute data flows generated by EMR systems and applies recent advances in machine learning and data science to help bend the cost curve and improve patient outcomes at the same time.

Those are bold claims, but they’re backed up by hard evidence generated by the company’s pioneering efforts at local healthcare leader Seattle Children’s Hospital (SCH). With support from Seattle Children’s Research Foundation, MDmetrix was originally developed to address physicians’ frustration with the lack of visibility into health outcomes. Once the system was deployed, it quickly became clear that both medical leaders and frontline physicians could use MDmetrix to assess and improve all aspects of clinical operations. The results were dramatic: MDmetrix has enabled its customers to improve care for thousands of patients, while also surfacing millions of dollars of cost savings and revenue enhancement opportunities.

MDmetrix is a commercial spinout from the non-profit Seattle Children’s, and the founding team includes the key technologists and medical leaders that helped develop and prove out the solution for SCH. They’re joined by a seasoned healthcare software leader, CEO Warren Ratliff, who previously played key roles at healthcare giants like McKesson and GE Healthcare, and at successful high-growth healthcare startups like Caradigm (a joint GE and Microsoft spinout).

We’re pleased to be joined in this fundraise by the Washington Research Foundation and Arnold Ventures, co-investors with a long track record of supporting health care innovation and commercialization efforts here in the Pacific Northwest. There’s a long road ahead to prove that the results achieved at Seattle Children’s can be replicated at scale across the industry, but the prize — better care at lower cost for millions of Americans — is well worth the effort.

Where does the time go?

In early 2008 we announced the formation of Founders’ Co-op. We called it a fund, but at $2.7 million it wasn’t much of one, just some of our own money and some from a few local friends who knew how hard it was to be a founder up in this remote corner of the world.

Seattle then was famous for its coffee, for airplanes, and as the home of Microsoft, a once-feared tech monopoly whose valuation had peaked back in 1999, brought low by the one-two punch of the internet bust and the Justice Department’s antitrust ruling. The long-running property bubble had popped in late 2007 and global markets were unraveling, eventually turning into what would become known as the Great Recession.

In retrospect, it’s hard to imagine what we were thinking.

But starting a new fund in a downturn has its benefits. The only kinds of founders who start companies in the teeth of a recession are the ones who can’t imagine doing anything else. They don’t expect it to be easy, and when that turns out to be right they don’t quit. We met some amazing founders through that first fund, like Kabir Shahani and Chris Hahn at Appature, Aviel Ginzburg, Damon Cortesi, and Adam Schoenfeld at Simply Measured, and Scott Kveton and Steven Osborn at Urban Airship down in Portland.

As we learned from our early mistakes (and occasional good luck), we realized we needed to do even more to help local founders avoid the many traps and pitfalls that derail promising companies before they even get started. Some friends in Boulder were experimenting with an idea for a “startup accelerator” they called Techstars. We asked if they’d be willing to let us try a version of it here in Seattle and they agreed, so we launched the first Techstars Seattle class in the summer of 2010. We raised our second fund around the same time, a whopping $7.7 million, to lean into our strategy of being first to support the most promising founders here in the Pacific Northwest.

Somehow, all of a sudden, it’s ten years later. We’re still doing the same thing we’ve always done, but the world has changed around us.

Seattle is now one of the world’s top markets for software engineering talent. Microsoft is resurgent under Satya Nadella’s leadership, and local upstart Amazon has taken its place as the most feared company in tech. Bay Area leaders like Google, Facebook and Apple (plus dozens more) have scaled their Seattle offices to thousands of employees, taking advantage of our deep bench of talent, and drawing in more.

Over the past 10 years, through three successively larger funds, we’ve made over 90 first-check investments in Pacific Northwest companies, including some well-known local names like Remitly, Outreach, Auth0 and The Riveter. In aggregate, those 90+ companies have gone on to raise over $1.5 billion in follow-on capital, and now employ thousands of talented people here in the Pacific Northwest, and around the world.

One of those amazing founders from our first fund, Aviel Ginzburg, is now my investing partner at Founders’ Co-op, and we just closed our fourth fund, our largest ever at $25 million. In a few weeks we’ll celebrate Demo Day for our 10th Techstars Seattle class, bringing us to 100 total new companies that have been supported by that program.

Venture funds have a ten-year life, so every time we close a new fund it means we’re signing up for another decade of investing. Ten years ago we knew we wanted to help the best founders in the Northwest stay and build their companies here instead of leaving for the Bay Area. We just weren’t sure exactly how.

This time it’s different.

We’ve spent the last ten years honing our craft and building a community of founders, investors and mentors dedicated to our shared mission of making the Pacific Northwest the best place in the world to start a software company. Over the same period, our regional startup ecosystem has grown and changed in ways we never imagined, offering a more diverse and talented pool of potential founders than we’ve ever seen.

As with our first fund back in 2008, it looks like we’re heading into another cycle of uncertainty in the global economy. We expect markets to slow, or even contract, over the next few years. We expect the last several years’ run of easy money for startups to end along with it. Putting that all together, we know for sure that the founders we back in this next cycle will be some of the best we’ve ever seen.

We can’t wait.

I’m thrilled to announce that we’ve just led a seed investment (our largest first-check investment to date) in Ally, the intelligent operating system for business execution. Ally helps businesses tightly connect strategy to execution, and leverages ML to orchestrate alignment and transparency throughout an organization. Step one of their mission is to bring a highly effective Objectives and Key Results (OKR) process into organizations of all sizes, through a workflow that engages team members within the tools they’re already using, like Slack.

So far so good.

Today they’re already working with companies like Slack, Remitly, Plaid, Teleperformance and UrbanClap, and are adding new customers at a rate I haven’t seen since the early days of my former startup, Simply Measured.

But like it says in our name, we invest in founders first and businesses second. We didn’t chose to partner with Ally founder Vetri Vellore just because of the amazing business he’s built, but also because of the passion and thoughtfulness with which he is building it. In fact, we almost passed on our first introduction to Vetri because of our existing bias against OKRs.

Over the past decade I’ve been part of over a dozen OKR deployments, including one as the lead product executive tasked with rolling it out to a large organization. I’ve now used everything from spreadsheets to disastrously complex HR-focused solutions that tie business performance to employee performance, and I just couldn’t wrap my head around how an organization that wasn’t Google (famous for successfully using OKRs), could really put them to good use. That was until I met Vetri, who not only utilized OKRs extremely successfully at his previous startup, but also showed me a product that I actually wanted to use. One that I wanted all of my portfolio companies to use as well. One that would make them better and give them an edge over their competitors.

Welcome Vetri, to the Founders’ Co-op family! We’re honored to be part of your mission to fundamentally change the way high-performing companies operate.

PS: If you or one of your friends is a marketing leader and a sales development rep looking for a once-in-a-career opportunity, shoot Vetri an email @ vetri [at] gotoally.com.

We’ve written a lot about how our investing work at Founders’ Co-op connects to the broader global market for innovation finance (see The Venture Capital Stack or Regional Seed Investing), but we’ve never said much about where our own fund’s capital comes from.

Recent events have shined a bright, and ugly, light on the source of much of the money driving the current Venture Capital boom, and fellow investors and industry journalists are now advocating for greater transparency about whose money you’re actually taking when you accept a VC check (see this post from USV’s Fred Wilson, or this Techcrunch piece from Jon Evans).

As our earlier posts have described, global allocators of capital like Saudi Arabia aren’t much interested in regional or seed-stage investing; they have to deploy money in such huge volumes and with such frequency that only the biggest and most global platforms (like Softbank) are a fit. So if you’re curious, we never asked, and they certainly didn’t come calling.

But we do care, a lot, about where our money comes from. And while it’s not something we talk about publicly, at Founders’ Co-op we’re as proud of our investor base as we are of our investment portfolio.

Our work is intensely local, and intensely personal. We invest in exceptional people who have chosen to build their companies here in the Pacific Northwest. When they succeed, companies like Remitly, Outreach and The Riveter provide exciting, well-paying jobs for hundreds or even thousands of people who live and work here in the region. The leaders of those companies also become civic leaders who give back to our community, and they model the kind of pioneering courage that put our region on the map in the first place.

Our investors trust us to produce a compelling financial return, but they choose us over the thousands of competing alternatives because they believe what we believe: that building great companies in the place where you live produces returns that go way beyond a check in the mail. Well-paying jobs. Engaged citizens. A leadership role in the global economy. Thriving cities that are magnetic to talent from around the globe.

Given the values we practice as a firm, it should come as no surprise that our money is almost entirely local: founders and early leaders from our region’s most successful companies (including many of our own portfolio companies); families and family foundations with a long history in the region, who want to leave it a better place for their children and grandchildren; and even state governments with a voter-endorsed commitment to reinvesting in the next generation of local jobs and growth.

We know our investors and they know us. Our work is personal, and we take it personally.

When Rudy Giuliani declared “Truth isn’t truth” in defense of Donald Trump, I cringed. Not just for the obvious reasons, but because as I absorbed the absurdity of his statement, it hit uncomfortably close to home.

How do startup leaders think about truth, especially in the age of Theranos? What’s a true statement in or about a startup? Things move so fast (especially in the really early and high growth phases) that something that is true today often isn’t true tomorrow.

With the pace of change (both macro and micro), communicating progress can feel like an exercise in reporting on the status of Schrödinger’s cat. What complicates things is that as founders and leaders it’s surprisingly hard to tell employees or investors “I don’t know”. It’s even worse to not communicate at all. You’re pressured to have an answer, and if you don’t, it looks like you don’t understand your business. But when you’re wrong, you lose credibility.

That’s where we as investors can do better to help founders be as truthful and transparent as possible about their business, because the more we know, the more we can help. But investors don’t always do the best job of making founders comfortable with vulnerability and instead can reinforce the overconfident salesy mode of operation that’s often a requirement for leading a growing company through its inevitable struggles. This is one of the many reasons why it’s so important that founders select investors that they trust and connect with vs. the one that offered the best terms. But even then, talking about all the inevitably broken or at best partially broken and uncertain things in your business can be hard.

To make these kinds of conversations easier, I’ve found it useful to categorize judgements and statements about startups into 4 categories.

True as in “We closed a seed round”
Something that is objectively true.

Temporarily true as in “We’re going to hit next month’s revenue goal”
An outlandish goal that helps motivate and drive alignment. An optimistic view into something you’re trying to achieve that you think (hope) you will.

Temporarily false as in “We are the market leader”
Something aspirational and often visionary. Said more cynically… unmalicious and purpose-built self-deception.

False as in “We pay a competitive salary”
Something objectively false.

The reality is, if you’re a founder, you’ve probably said all of these things at one point or another to your customers, employees, and investors. Depending on when, you’d also probably categorize them differently. If you’re lucky, you’ve been successful enough to transition all 4 of those statements to true.

The temporarily true things are your rose-colored glasses. They are your rallying point and the overly optimistic claims that motivate people into making your goals a reality. They help keep people excited through the hard times when progress looks like one step forward and two steps backward.

The temporarily false things are the little lies that you’ve decided to tell as part of achieving a goal where in the ends justify the means. You have every intention of making these things true, and really do believe that by the time it actually matters it will be. In enterprise SaaS, you’d never land your first customer if they knew how bad or incomplete your product was. Your first employee would also never join if they knew how close you were to not being able to pay them.

Or would they? That’s where things get complicated.

Reality distortion fields, while effective, are a powerful but blunt instrument. In the hands of an outwardly confident but intellectually honest and inwardly reflective founder they can be a fantastic tool and let you pull the future backwards into the present. Used too often though, or by someone lacking self-awareness or integrity, and they can be the most destructive thing possible.

But with great power comes great responsibility, the difference between you and Theranos is not a giant chasm, it’s the slippery slope of transitioning your aspirations into your realities and what you’re willing to risk to achieve that. When something is only temporarily true, you need to recognize that. When it’s temporarily false, you need to recognize that too.

And while it can seem like 80% of your job as founder (and especially founder-CEO) is being a confident visionary, that’s where I think founders start to run into trouble. Startup founders are always fundraising, always recruiting, and always telling their story. Once you repeat it so many times, add charisma to it, pour your life into it, and maybe even say it on stage in front of hundreds or millions through the press, it becomes challenging to maintain your intellectual honesty. It’s like drinking a bottle of wine every night and trying not to become an alcoholic.

This self-deception is the slippery slope I’m referring to. It’s more dangerous than lying because it can become impossible to bifurcate those parts of your business that are truly enhanced by your ability to influence reality vs. those that can be destroyed by it. You can find yourself suspending reality when you actually need to be embracing it.

It can make great teams underperform and in extreme situations can make good people do bad things.

Worst of all, it’s nearly impossible to self-evaluate self-deception, and that’s where diverse leadership teams and great founder/investor relationships become paramount. Because while creating a reality distortion field is a powerful, and probably even required tool for building a successful startup, being grounded and intellectually honest is a more consistent factor in success. But you can’t ground yourself, you have to surround yourself with great people who bring out the best in you and make you your best self, even if it’s uncomfortable (it’s usually very uncomfortable).

Nothing in startups is simple and the truth is almost always complicated. In the sense of Schrödinger’s cat, your startup can both be crushing it and about to be crushed at the same time. It’s okay to recognize that, and with the right tools and hard work, the cat will be alive when you open the box.

Thanks to John Scrofano, whose feedback on the first version of this post was so impactful and widely incorporated that he’s now a co-author.