I Was a Founder Before I Became an Investor — Here's How It Shaped My Investment Strategy Former founders are reshaping venture capital and startup consulting, offering unique operational insights and hands-on support. This shift towards founder-led investment and mentorship is creating a more supportive ecosystem for early-stage entrepreneurs.
By Rob Grazioli Edited by Kara McIntyre
Key Takeaways
- Founder-turned-investors offer unparalleled operational insights and hands-on support, boosting startup success rates.
- Experienced founders are increasingly engaging as strategic consultants, providing hands-on guidance to shape new businesses.
- This shift underscores the value of real-world experience in venture capital, promoting sustainable growth over hype.
Opinions expressed by Entrepreneur contributors are their own.
Before becoming an investor at Bread, I was a startup founder. I know what it's like to stand before a room full of people, palms sweating, asking them to believe in me. I also know the relentless effort it takes to prove, time and again, that their faith — and their money — will pay off. My journey from founder to funder was shaped by these experiences, and it's why I approach investing differently.
As a founder, I benefited most from investors who went beyond providing capital. They mentored me, guided me through difficult decisions and became true partners in my entrepreneurial journey. Now, as an investor, I aspire to offer the same kind of support to the founders I back because it's something that the startup world has long been missing.
This founder-to-funder transition isn't unique to me — I'm seeing a growing number of entrepreneurs take their hard-earned experience and apply it to venture capital. What's more, there's an increasing number of former founders taking on strategic consulting roles for young companies. These "founders for hire" aren't just giving advice from the sidelines; they're applying years of entrepreneurial experience to help today's founders plan, execute and grow their businesses.
Both founders-to-investors and founders-for-hire are transforming how startups are funded and nurtured, and I believe it will have a profound impact on the startup ecosystem for years to come.
Related: How Saying 'Yes' to Every Opportunity Helped My Startup Make $1 Million in the First Year
A unique perspective
Successful founder VCs have investment success rates that are 6.5 percentage points higher than professional VCs. This doesn't surprise me. Founder-turned-investors bring something to the table that isn't common in the VC world: operational knowledge. They've experienced the highs and lows of startup life, understand the challenges of scaling a business, and have a keen eye for identifying promising ventures. Investors with startup experience can relate to founders on a deeper level, offering insights that traditional investors might miss.
My co-founders and I built our first product company, Density, from the ground up, which has shaped my approach to supporting my portfolio companies. It's a common misconception that innovation in business is all about technological discovery, when really it's about solving "boring problems." I look for founders who are just as excited about their hiring practices, operational processes, and financial planning, as they are about their product development. When you're excited about the boring things, you build better products and run a more stable business. I wouldn't know this without the firsthand trial-and-error experience I gained as a founder.
How experiences shape investment strategies
If you're a founder looking to raise capital, here's why you want to look for an investor with startup experience:
- Emphasis on product and market fit: Having built products themselves, a founder-turned-investor is able to quickly assess a startup's potential to solve real-world problems.
- Realistic expectations: They understand the challenges of scaling and are often more patient with growth trajectories.
- Focus on fundamentals: They tend to prioritize sustainable business models over hype-driven metrics.
- Empathy for founders: They're more likely to back passionate founders who demonstrate grit and adaptability.
Investors with startup experience also offer much more than access to capital, often providing founders with access to their network, partnership opportunities and guidance on every part of the business.
The importance of hands-on involvement
One of the most significant advantages that a founder-investor brings to the table is a willingness to roll up their sleeves and get involved in portfolio companies. They often want to know the ins and outs of product development at every company they invest in and the operational challenges they're dealing with.
Are they struggling to hire the right people? Are they lacking clear processes for project deliverables? Are they conflicted about which product feature to prioritize?
Whatever the challenge, founder-turned-funders are not afraid to get into the trenches with their portfolio companies. Personally, I've spent hours helping founders reshape their visual identity, refine their marketing strategy or even relaunch their product if necessary. In many cases, I am literally in the code with them.
Investors who've started their own companies know how hard it is. They want to provide emotional support and guidance through the intense ups and downs of startup life. By being a sounding board for the founders I work with, I hope to make the journey a little less stressful, which can make achieving success a bit easier.
Related: What Should You Value More — An Investor's Money or Their Experience?
The future of the founder-led startup ecosystem
Just as founder-led venture capital firms offer early entrepreneurs access to operational guidance, working with a consultant who has started their own company can provide invaluable mentorship opportunities.
What sets a founder-for-hire apart from a traditional consultant is the depth of their involvement. They're not just helping startups refine their sales motions or market strategies; they're actively shaping products, helping find market fit, and even assisting in building out teams. It's a level of engagement that goes far beyond typical consultant-client relationships. It's also a flexible way for startups to tap into years of experience without needing to hire someone full-time or give up too much equity.
Having a founder-consultant on your team is one of the smartest things you can do as an early entrepreneur. The combination of practical experience is invaluable in those first stages of business growth.
Bridging the gap
The rise of founder-turned-investors and entrepreneurial consultants is changing the game for both venture capital and startups. By mixing financial knowledge with the real-world experience and hands-on involvement of former founders, these new players offer a unique level of business development and growth potential for young companies.
For new entrepreneurs, this means a more supportive and understanding investment landscape. And for the startup ecosystem overall, it means a clearer path to success for everyone involved.
