The term “full-stack” developer has grown in popularity over the past few years. The term generally means that a developer can code on both back-end/server-side and front-end/client-side, and has a wide range of coding and development skills that can help create the APPLICATION WHOLE. Modern web and mobile applications that rely on rapid interactions between end users and back-end services, such as cloud and data processing, have created the need for full-stack developers – someone who brings deeper understanding, perspective, and skills to build an application across all layers of the computing stack. In this modern age of business building, developers aren’t the only ones who need comprehensive capabilities.
Having spent more than 25 years helping founders build amazing businesses, the Madrona team believes a complete venture capitalist is someone who digs in and helps entrepreneurs build the ENTIRE COMPANY over a long period of time. period. Founders and entrepreneurs develop their skills and capabilities from day one of their business, and they need partners with a wide range of resources to help them become leaders and scale their business. In other words, the full-stack VC and the ever-learning founder represent a “founder-investor” fit that every founder strives to find.
Having spent more than 25 years helping founders build amazing businesses, the Madrona team believe a complete venture capitalist is someone who digs in and helps entrepreneurs build their business over a long period of time.
What does it mean to be a full-stack VC? There are four fundamental elements: business building skills, long-term capital, high commitment and good judgment. These elements represent the empathy of an early-stage targeted VC, the judgment and discernment around uncovering and scaling product-market fit, and the trust established by making decisions and learning together for many years.
Business creation skills: Most founders are starting a business for the first or second time. Even with their immense talents, they benefit from investors who have seen around the corner, anticipated future challenges and helped to mitigate them. VCs with previous operating and consulting experience, as well as some specialized skills, are likely best to serve these founders and their businesses. Some hard skills are functional, such as expertise in product management, engineering, go-to-market, or business development. Other skills are situational, such as developing an operating plan, managing people, and navigating mergers and acquisitions scenarios. It’s also important to understand a domain, like cloud computing or fintech, and to have deep connections and learnings within an industry. Having investors and board members who possess a mix of functional, situational, and domain skills, and who are self-aware to know their strengths and weaknesses, are good indicators of a full-stack VC .
Long-term capital: Investors and venture capitalists can have very different private company investment strategies. Some investors are angels or focus on the seed stage and bet heavily on people and the belief that these founders are “founder market fit” for the problem they are trying to solve. But some of these investors lack sustainable sources of funding to meet a company’s long-term needs. Other investors focus on the middle stage and look for companies that have achieved “product-market fit” and are beginning to grow systematically. Finally, there are later-stage/crossover investors who are primarily financially driven – focusing more on financial metrics and the ability to obtain liquidity over time.
Full-stack VCs cover these investment and business support stages from day one. They set aside capital to support these businesses for the long term. They can make a seed or Series A investment and then invest their pro rata in all stages of those same companies. These sustainable financial resources give founders confidence that their investors will have value-added capital and resources to support them through any market cycle. These VCs don’t need massive funds (in fact, a large fund size can make it easier to “lose” in a portfolio) and they want to stay in line with ambitious founders on capital efficiency. Sufficient capital from your early VCs also attracts strong follow-on investors who want to syndicate with early-stage investors who have the resources to build businesses over time. Structurally, full-stack venture capitalists and their businesses align their incentives and economic outcomes with entrepreneurs who commit to focusing on long-term value creation.
High engagement: Successful founders and leaders want the autonomy to run their business, but they also crave proactive partners who add value and are available to meet strategic business needs. A full-stack VC is ready to roll up their sleeves and be available to teams for many years and through many stages of business evolution.
A full-stack VC is ready to roll up their sleeves and be available to teams for many years and through many stages of business evolution.
A high degree of interaction and a shared context around strategy, people and culture build trust. Knowing that your venture capitalist (and their business) has a proven track record of adding value through the ups and downs of building a business greatly increases alignment around achieving your goals. It’s also important to have personal chemistry between founders and their key investors, because a genuine relationship of trust leads to quality decision-making and fun together along the way.
Good judgment: No one has “seen it all”, so skill, experience and commitment can only take the full VC so far. They also need good judgment. Amazon has a phrase for these people – they are “very right”. They combine experiential learning, boundless curiosity, and the ability to “connect the dots” in a way that produces advice worth listening to. In our experience, this good judgment usually comes in the form of thoughtful questions, candid observations, and clear framing of issues that helps executives think through a difficult situation so they can make the best decision. based on current information and perspectives. And the best partners approach every decision and the resulting outcomes as a learning opportunity to be evaluated and integrated objectively into future decision-making.
Full-Stack or Stage-Specific VC? Both!
The private equity market has seemingly forced a false choice in the minds of some founders around their investing partners as they move from early-stage to intermediate-to-advanced companies. This false choice is between receiving in-depth business start-up support and operating assistance or having access to large amounts of capital. The full-stack VC frees the visionary founder from this artificial choice, as their whole strategy is to get involved early, build trust, and ensure that stage-appropriate capital and business building capabilities are available. everywhere. Madrona isn’t the only one with a full VC strategy and mindset. In fact, we particularly enjoy partnering with amazing syndicated founders and investors who share this mindset. And we recognize that businesses need different types of investors – with a core group that is tightly aligned and in your corner as you build the business.
Madrona is very excited to be a part of the business creation journey from the months and years of forming a business. Founders are the real customers to assess and find comprehensive VCs who share your vision of the founder-investor fit. When a Founder finds it right for them, truly special and rewarding experiences and results occur!