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Operator has experience. In the past few years, venture capital has become critical. Pure-play financial VCs are losing favor with startups compared to investors who bring building experience alongside their money.
But not all operating backgrounds are equally helpful. If a VC has experience in a different field, it may not work – at all – for a startup, and advice on some business decisions will quickly become outdated. There is now a growing group of VC funds run by people who think they are better placed to support companies because they are startup founders.
These organizations and founders may be onto something. Angellist’s latest data pulled for Flex Capital shows that funds raised on the founder-led platform surpassed those raised on Angellist.
According to the data, across all fund performance percentages, VC funds led by active founders outperformed those without that structure when comparing multiples on invested capital. Funds in the 90th percentile saw performance metrics that were almost double the number achieved by firms without a founder at the helm.
Now, let’s be clear, this data certainly doesn’t give the full picture. For example, we don’t know how founder-led funds compare to operator-led firms. This data set is based on funds raised on AngelList, which is clearly limiting, and it is not clear what the structure of these organizations is; Some may be founder-led but have entire investment teams.
But it begs the question: If proactive founders do, do they make better investors than anyone else?
To Jeff Lu, general partner at Flex Capital, the value of this model is clear.
His firm has three founding partners, two of whom are currently working as operators and Lu serves as a full-time investor. “Over the past three years, I’ve had to pitch Flex a thousand times, and I’ve never once had to explain to a founder why this is better,” Lu told TechCrunch+.
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